Infrastructure Outreach Final Report -...

Infrastructure Outreach Final Report

October 15, 2012

Attachment 1, Page 1 of 97

CalPERS Infrastructure Outreach Effort

Final Report

October 15, 2012


Contents

Executive Summary ....................................................................................................................................... 3

Section 1: Introduction ................................................................................................................................. 5

Section 2: General Findings from the Roundtable Discussions .................................................................... 8

Section 3: Summary of the Infrastructure Roundtable Discussions ........................................................... 14

Section 4: Additional Outreach and Discussions ........................................................................................ 18

Section 5: Development of Investment Opportunities...............................................................................20

Conclusion ................................................................................................................................................. ..22

Section 6: Attachments

Attachment 1: Agenda Item 7c September 12, 2011, Infrastructure Investment in California

Attachment 2: Agenda Item 7 October 17, 2011, Outreach Plan

Attachment 3: Term Sheets

Attachment 4: Infrastructure Strategic Plan Summary

Attachment 5: Infrastructure Fact Sheet

Attachment 6: California Infrastructure Investment Overview, Meketa Investment Group

Attachment 7: Infrastructure Roundtable Agendas

Attachment 8: Participant List


Executive Summary

On September 12, 2011, the Investment Committee of the California Public Employees’ Retirement System (“CalPERS”) Board of Administration (“Investment Committee”) earmarked up to $800 million for investment in California infrastructure over a three-year time period. The primary goal of this initiative is to make investments in essential infrastructure assets that meet the risk-return objectives of CalPERS Infrastructure Program (“the Program”), while also potentially benefiting local economic development and essential community services across the state. The Investment Committee instructed staff to develop a plan for outreach to state and local governments to explore the role CalPERS and other pension systems can play in facilitating infrastructure investment in California (“the Outreach Effort”).

The Outreach Effort consisted of CalPERS sponsorship of four Infrastructure Roundtables (the “Roundtables”) between March and May 2012, as well as other industry networking and information sharing initiatives. The Roundtables held at various locations across the state and were aimed to: (1) educate attendees as to the vast infrastructure needs of the State and the associated challenges and opportunities for potential pension investment in these projects; (2) inform the public regarding CalPERS infrastructure investment strategic objectives and policies; and (3) provide valuable opportunities for networking between investment staff and state, regional, and local government officials responsible for infrastructure planning, development, and financing.

The key takeaways from the Roundtable discussions include:

• There is a vast unmet need for investment in California infrastructure, including projects in transportation, water, and energy sectors. Available funding sources, including tax-exempt bonds and other state and federal programs, are not expected to be sufficient to meet the investment required to maintain existing infrastructure and to finance new development.

• Due to its large-size economy, positive demographic trends, high-quality public agencies, and recent supportive legislation, California is considered to be an attractive destination for infrastructure investment.

• There are numerous challenges to pension system investment in California infrastructure, including the availability of lower-cost, tax-exempt financing, a lack of projects which are suitable for public pension funds and other institutional investors, the absence of necessary statutory authorities in some cases, and complex regulatory processes.

• CalPERS may be an attractive partner for California public agencies, due to common interests and objectives with fellow public agencies, and due to the Program’s focus on high quality long-term, direct investments.

• Modifications to policy and legislation regarding project procurement and approvals may enhance funding and investment opportunities.

While suitable opportunities for pension investment are fairly limited at the present time, CalPERS Infrastructure Program staff is now actively engaged in developing specific in-state opportunities for investment.


This report, which represents the final step in the Outreach Effort, includes: a summary of discussions and findings from the four Infrastructure Roundtables; a report on investment staff’s involvement with various state and nationwide collaborative efforts; and information on staff’s efforts to develop potential investment opportunities.


Section 1: Introduction

CalPERS, headquartered in Sacramento, California provides retirement and health benefits to more than 1.6 million public employees, retirees and their families, and more than 3,000 employers. CalPERS is led by a 13-member Board of Administration (“the Board”) consisting of member-elected, appointed, and ex-officio members. CalPERS has a fiduciary duty set forth in the California Constitution, requiring the Board and staff to work at all times in the best interests of its 1.6 million members. For every dollar paid in CalPERS pensions, 66 cents comes from investment earnings. It is therefore vital that the Total Fund (“the Fund”) achieve appropriate risk adjusted returns from its investment strategies and the Investment Office be responsible for managing CalPERS investment assets which approximate $241 billion.

In 2007, CalPERS established an Infrastructure Program in the Inflation Linked asset class of the Investment Office . In July 2011, the Program was transferred, along with the Real Estate and Forestland Programs, to the newly-formed Real Assets asset class, and assigned a target allocation of 2% of the Fund. Shortly thereafter, the Investment Committee approved the Infrastructure Strategic Plan and the Infrastructure Program Investment Policy.

The Infrastructure Strategic Plan emphasizes the Program’s pursuit of low-risk or defensive investments, mainly in North America. The Strategic Plan also highlights the direct investment method, as a planned approach for providing control over capital deployment, direct influence on governance matters, and cost-effective investment. The direct investment approach in conjunction with other modes of investment is expected to enhance the Program’s competitiveness and its investment returns. As of June 30, 2012, the Program has made $1.09 billion in commitments to seven investments in the domestic U.S. and globally.

The Program has a unique strategic role within the Fund, with the objective of providing:

• Steady Returns and Cash Yields – regulated and long-term-contracted revenues and returns ensure steady investment returns and cash yields;

• Defensive Growth – the essential and protected/non-competitive nature of infrastructure assets insulates returns against demand (growth) risks;

• Inflation Protection – direct and indirect inflation-linkages serve to preserve asset values over time; and

• Diversification Benefits – private infrastructure investment is expected to demonstrate low correlation to fixed income and listed equities.

The Program’s benchmark is the U.S. Consumer Price Index plus 4% per annum, calculated on a monthly basis and applied over relevant time periods.

In June 2011, CalPERS engaged Meketa Investment Group, Inc. (“Meketa”), the Board's consultant for Infrastructure, to prepare a report on conditions for pension investment in California infrastructure. Meketa’s report was presented to the Investment Committee on September 12, 2011. At that meeting, the Investment Committee announced its decision to earmark up to $800 million for investment in


California infrastructure, and instructed staff to develop a plan for outreach to state and local governments to explore the role CalPERS and other pension systems can play in facilitating infrastructure investment in California (Attachment 1).

In October 2011, the Investment Committee approved staff’s proposed Outreach Effort (Attachment 2), which included a coordination and policy process and an investment pipeline enhancement process. Meketa assisted with the development of the Outreach Effort and drafting this Final Report. CalPERS outreach initiatives included (a) four widely-attended infrastructure roundtable meetings, (b) collaborative initiatives with various state and national agencies, and (c) one-on-one investment discussions between Infrastructure Program staff and representatives from various California public agencies.

The first of these initiatives involved organized, public roundtable discussions with a variety of constituents and industry participants at various locations within the state. The Roundtables provided forums to facilitate open discussion on the opportunities for, and impediments to, pension system investment in infrastructure within California. More specifically, the Roundtables facilitated:

• Opportunities for experts to share information regarding project development and priorities, and their perspectives on opportunities and challenges regarding financing and investment in infrastructure;

• Access for stakeholders to information about CalPERS Infrastructure Program and investment initiatives;

• Identification of potential policy changes that could make infrastructure investments by pension systems more viable; and

• Opportunities for CalPERS to explore how it might best contribute to improve investment conditions, and increase the potential for infrastructure investment by pension systems.

The Roundtable discussions generated numerous findings related to State infrastructure investment needs, limitations on current funding sources, and impediments to pension investment due to market, legal, and project-specific considerations. A summary of the general findings from the Roundtable discussions is included in Section 2 of this report. A summary of the Roundtable discussions can be found in Section 3 of this report.

The Outreach Effort also entailed dialogue and collaboration with various stakeholder groups across the nation to exchange perspectives on, and ideas for sharing and advancing knowledge regarding infrastructure opportunities, policies, and stakeholder priorities. A summary of these initiatives is provided in Section 4 of this report.

Additionally, the Outreach Effort entailed several one-on-one investment discussions between Infrastructure Program staff and representatives of individual public sector agencies to discuss potential investment opportunities for CalPERS, including existing assets and projects in development. A description and summary of the results of these efforts is provided in Section 5.

The Outreach Effort is only one component of CalPERS infrastructure investment activities in California. The Program currently has $94 million invested in California infrastructure projects through its portfolio


of commingled fund investments. CalPERS also invests in California infrastructure through other asset classes. Private Equity has more than $220 million invested in infrastructure in California. CalPERS Private Equity Fund Managers invest in privately held companies that own infrastructure assets including power generation (hydro, natural gas, wind, and solar) and transportation. Fixed Income has invested $100 million in credit enhancement for General Obligations in California. Of that, half is for California general obligation bonds which could fund a variety of projects that would include, but are not limited to, water, transportation, school construction, hospital construction, or other such voter-approved capital projects. The remaining credit enhancement is for California general obligation bonds specifically for public school construction.


Section 2: General Findings from the Roundtable Discussions

Presentations and discussion by participants at each of the four Roundtables generated a number of findings related to both opportunities and challenges of pension system investment in California infrastructure. Roundtable participants also helped to identify potential changes to policy and legislation that may enhance funding and investment opportunities.

Current funding sources are insufficient to meet California’s infrastructure investment requirements

All infrastructure sectors have significant investment requirements related to the operations, maintenance, expansion, and replacement of existing facilities and the development of new projects. Limited public-sector funding may represent an opportunity for investment by CalPERS and other state pension systems.

In the current low-interest rate environment, public agencies with high credit ratings and healthy budgets can still finance their infrastructure projects through tax-exempt bonds. However, if stress on public agency budgets continues to escalate, issuing such bonds may become more difficult. It was also noted that federal deficit reduction proposals may lead to the eventual elimination of the tax-exemption bond benefit.

As the risk of not obtaining traditional financing for state and local government projects grows, public agencies may need to evaluate alternative funding sources for infrastructure projects. Private institutional investment is considered to be a potential alternative. However, there are challenges associated with alternative finance for infrastructure procurement; “political champions” are needed for projects to be successful. These champions are needed to identify and support viable investable projects for which pension system investment or other alternative funding sources could be used.

Roundtable participants acknowledged that, due to the scale of the funding needs, CalPERS and other state pension systems could only provide a small part of the solution, and it was suggested that a broader systematic approach to financing California’s infrastructure requirements would be beneficial. Examples of systematic approaches used in Canada and Australia were referenced; however, it was stressed that any approach would need to take into consideration California’s unique political, economic, demographic, and geographic conditions.

California is an attractive destination for investment

During Roundtable discussions, participants emphasized that California is considered to be an attractive destination for infrastructure investment. In addition to the funding needs summarized in the previous section, reasons cited for the appeal of California to infrastructure investors include the large-size economy, positive demographic trends, high-quality public agencies, strong regulation, and the existence of legislation enabling Public Private Partnerships (“P3”).


California’s P3 law is considered to be an important tool for California transportation investment. Passed in 2009, the law allows regional transportation agencies and the California Department of Transportation (“Caltrans”) to enter into an unlimited number of P3s and deletes the restrictions on the number and type of projects that may be undertaken. In addition to risk sharing and possible savings over the lifecycle of a project, the structure of P3s allow public agencies to shift rehabilitation costs to the future, to make more funds available for present-day needs. Other Roundtable findings related to the P3 law include:

• California’s P3 law will sunset in 2017. It was recommended that public agencies work with the State Legislature to extend the term for which P3s are authorized.

• California's P3 law required the establishment of the Public Infrastructure Advisory Commission (“PIAC”), to identify transportation project opportunities for P3s and advise Caltrans and regional transportation agencies regarding infrastructure partnership suitability and best practices. Participants considered PIAC to be a sensible model that could be enhanced to be a more effective resource, with the renewal of the P3 law. For example, PIAC could have a dedicated funding source, and the scope of the mandate could be expanded.

• Current education and training in alternative project delivery at public agencies is limited. Participants referenced relatively inexpensive education options, including online training programs. It was noted that in the energy sector, public utilities have funded a program to provide assistance to developers of renewable energy generation.

• California does not have a standard template to assess the “return on investment” achieved by different modes of project funding and delivery. However, it was cautioned that California should not simply adopt a template from another state or country, because it may not be appropriate for California’s unique conditions.

• Participants also recommended the adoption of legislation to streamline the California Transportation Commission process embedded in the P3 law.

In addition to the P3 law, which is focused on transportation projects, California Government Code 5956 allows governmental agencies to enter into P3 arrangements to build, increase, upgrade, or operate many types of fee-producing infrastructure projects, including those related to water supply, treatment, and distribution, energy or power production, waste treatment, and other projects.

CalPERS is an attractive partner for public agencies Roundtable participants noted many of the competitive advantages that CalPERS has over other investors, including:

• A dedicated infrastructure program and resources focused on direct investment; • Alignment of interest with the public sector, due to its status as a government agency and long-

term investment approach; • California’s highly rated public agencies and high-quality infrastructure assets are a good fit with

the CalPERS Infrastructure Program’s strategic focus on lower-risk investments; and • CalPERS may acquire equity interests in public projects without adversely impacting the tax-

exempt issuing status of the sponsoring public agency or its project vehicle.


There are several challenges to pension fund investment in California infrastructure

Despite the recognition of the need for additional sources of investment, several impediments to infrastructure investment were discussed:

1) Use of tax-exempt bonds

The primary impediment to equity investment by pensions, across all public infrastructure sectors, is the strong access to the tax-exempt bond market enjoyed by many government agencies. The availability of tax-exempt bonds raises issues related to the comparative cost of capital of pension systems and how such capital can be used in projects funded with tax-exempt bonds.

In the current environment, with tax-exempt bond interest rates near historic lows, public agencies have access to funding at lower rates than the targeted rates of return of CalPERS and other equity investors, which are typically above 8%. Therefore, tax-exempt bonds are the lowest cost option and represent the majority of funding. For example, in the water sector, over 75% of funding for state and local water and wastewater projects consists of revenue and general obligation bonds. Larger municipal agencies and the State Water Project are highly rated (AA and higher) and have had consistently strong access to the tax-exempt market and very low borrowing rates. For high-rated agencies, such as the Department of Water Resources, and the Los Angeles Department of Water and Power (the largest public utility in the country), it was estimated that the true cost of interest on long-term, fixed rate tax-exempt bonds in the current market is 3%.

Institutional investors such as public pension systems cannot compete with tax-exempt financing on a simple cost basis (e.g., barring consideration of risks retained by the public agencies). In general, the Internal Revenue Code restricts the use of equity capital in projects that are funded using tax-exempt bonds. Proceeds from Private Activity Bonds, which are municipal securities that may be used by private entities, are one possible exception, yet their use is also subject to certain conditions and limitations.

Participants also discussed other factors related to the use of tax-exempt bonds, such as the bias in the U.S. towards the public ownership and financing of infrastructure, and tensions created by incorporating private equity into the capital structure of public infrastructure projects. There was discussion around the possibility of creating a “Public-Public Partnership” structure between state pension systems and public agencies that might address some of these concerns. It was noted U.S. public pension systems might be perceived as better-aligned and more-appropriate partners for public agencies than other private sector investors.

While larger agencies may not need alternative funding sources, smaller agencies may have more limited access to low-cost tax exempt debt or have a specific interest in transferring risks that cannot be efficiently borne by a public agency, such as project delivery or technology risks. Examples of projects in which the public might seek to transfer risk to the private sector include desalination, water treatment, and sustainability initiatives.


2) Investment Fit

A second challenge is the fit of certain projects within the framework of investment policy guidelines and strategic objectives of institutional investors, including CalPERS. For example, in the transportation sector, it was estimated that of the 2,000 state and local transportation projects identified per year, 60% require less than $5 million in funding. The majority of projects would be too small for consideration of direct investment by larger institutions with significant allocations to infrastructure.

For primary-market investments, staff discussed concerns related to the length and cost of the public auction processes used to procure investment in infrastructure. The public auction process can be both time-consuming and costly for bidders, and may require a level of “capital at risk” that is too high for a pension fund to assume. Therefore, staff expressed a preference for bilateral negotiation with public agencies about potential investment opportunities in lieu of engaging in a public bidding processes. It would be beneficial to clarify if public agencies may engage in bilateral negotiation with U.S. public pension funds, or whether it is strictly necessary for public agencies to procure investment for infrastructure exclusively through the public bidding processes.

In addition to potential uncertainty around public sector procurement processes, P3 projects typically require long and uncertain development and construction periods, which introduce additional risk to investors. P3 projects may also take several years before reaching stabilized operations allowing for cash distributions to investors.

It was noted that there are models of successful risk sharing between the private and public sector, in which private equity served as “risk capital,” while pension systems could provide “take out capital” for operational lower-risk assets. Participants suggested that certain projects in a construction phase could be suitable for pension system investment so long as key risks have been identified and mitigated.

Investment staff discussed potential limitations on investment in projects where key contractual terms, such as those between concession partners in design-build contracts, have already been negotiated. Early participation in such negotiations could allow CalPERS to ensure that its interests are represented in the final structure, and to strengthen its alignment with other consortium partners.

Concerns about investment fit were also raised in the discussion of investment in energy efficiency projects. It is uncertain as to whether such assets can be suitably structured for investment by institutional infrastructure investors. There was also the opinion that such projects might be more suitable for tax-exempt bond financing, rather than pension system capital.

CalPERS state agency status, which affords it certain advantages as an institutional investor, also presents certain limitations to its ability to participate in investment in California. For example, pursuant to provisions of the Internal Revenue Code, CalPERS would risk losing its tax-exempt status in an investment if it were it to participate in a “prohibited transaction,” where a transaction includes the acquisition of more than 25% of a debt obligation of a CalPERS member agency. Such a rule substantially limits opportunity for in-state investment by CalPERS.


Finally, concerns were expressed related to potential conflicts of interest and reputational risk for CalPERS, or any state pension system, as a potential direct shareholder of a public infrastructure asset in California. For example, certain investment-related decisions may result in outcomes that are unpopular, such as decisions to raise tolls on toll roads. Faced with such conflicts CalPERS may be more comfortable – in its return-seeking role – with investing in industry-facing infrastructure (e.g., energy and power, or ports and rail assets) than with investing in assets patronized and directly relied upon by the general public such as transportation and water assets.

3) Regulation

The Energy Roundtable discussed impediments to investment related to the permitting and development of power and transmission facilities in California. It was noted, for example, that in the renewable energy sector, constraints on the development of new transmission facilities are an obstacle to new development and investment. Several presentations referenced case studies of projects that took several years before receiving final approvals and licensing. Comparisons were drawn to conditions in other states where lengthy permitting processes are not an issue. Permitting challenges have resulted in high rates of project mortality. Lengthy and uncertain approval processes discourage investors who may have substantial capital at risk during the process.

There was broad discussion of the sources of permitting challenges and project delays from industry participants:

• The complexity of development in California, due to population, logistics, geographic factors, and policy, can require conservation measures and multiple permits from numerous agencies. There was consensus that the development of new facilities in other states was subject to less complex permitting requirements. This was considered relevant because investment capital is likely to seek the least risky investment opportunities.

• Compliance with California’s environmental protection laws, such as the California Environmental Quality Act (CEQA), requires that project developers and investors undertake significant mitigation efforts which, in some cases, have increased project costs, delays, and uncertainty of success. Roundtable participants suggested that thoughtful and appropriate streamlining of the CEQA process could increase the investor appetite for investment in California infrastructure.

4) Other Challenges

Other challenges to pension system investment in energy infrastructure were also discussed, including the following:

• Within the current energy infrastructure industry regulatory framework, developers and investors are typically not incentivized to take on the risks associated with implementation of new technology. A risk sharing framework between regulators and developers could incentivize investment in new technology.


• There is no centralized exchange for public authorities to circulate information on energy infrastructure projects requiring investment to potential investors. Increased information flow on infrastructure financing needs may serve to facilitate investment.2

• For projects in the renewables sector, there is limited need for equity that is not tied to tax credits. Developers already have a backlog of tax credits that need to be monetized and are looking to sell assets that allow the use of tax credits. Therefore, there is less need for investment by tax-exempt institutions which are unable to take advantage of these credits such as public pension systems.

• It is expected that tax incentives for renewables development, such as Production Tax Credits, will expire at the end of the year and will dampen developer and investor interest in the sector.

• Participants also noted inconsistencies in the Federal tax treatment of renewables projects that affect project economics. For example, property taxes are levied in full for wind projects while solar projects qualify for property tax exemptions.

Recommended changes to policy and legislation may enhance funding and investment opportunities

Several recommendations for facilitating investment in California infrastructure by pension systems were identified through the Roundtable discussions. Some of the key recommendations for potential follow up by stakeholders and other interested parties include:

1) Develop more-flexible and robust procurement methods for in-state agencies. It was recommended that alternative models of infrastructure procurement that have been utilized in other countries and states be evaluated for their suitability in California.

2) Streamline California environmental approval requirements. Compliance with CEQA was cited as an impediment to the development of infrastructure projects in California. Roundtable participants acknowledged California’s unique environmental resources and the importance of having regulation in place to protect the environment. However, project developers are discouraged by the complexity, indeterminacy, time delays and high costs associated with the approvals process. It is recommended that possible methods for streamlining CEQA and other permitting and approvals processes for critical infrastructure projects be evaluated.

3) Renew existing legislation enabling P3’s in California and consider expanding its mandate. This P3 law is set to sunset on January 1, 2017. It was recommended that the law’s sunset provision be extended. It was also recommended that substantive support be given for the PIAC or a similar body to assist the state with its development of standards and best practices for public infrastructure procurement.

2 See Section 4 for information regarding the development of the West Coast Infrastructure Exchange, which is intended to address this issue.


Section 3: Summary of the Infrastructure Roundtable Discussions

Four Infrastructure Roundtables were held as part of the Outreach Effort. Investment Office staff worked with CalPERS External Affairs and Meketa to develop the agendas and identify participants for each of the Roundtables. Attendees included State, regional, and local government elected officials and staff, investment professionals and practitioners, CalPERS Board members and staff, academics, and labor representatives.

At each session, staff provided an overview of CalPERS Infrastructure Program, including the strategic role of infrastructure within CalPERS total fund and examples of recent investment activity. Staff also provided Infrastructure Program Term Sheets (Attachment 3); the Strategic Plan Summary (Attachment 4); An Infrastructure Fact Sheet (Attachment 5); and the California Infrastructure Investment Overview report by Meketa (Attachment 6). Likewise, at each session representatives from the State Treasurer’s Office presented on the State’s perspective on financing needs and resources, such as bonding capacity for different sectors. The agendas for each of the Roundtables may be found in Attachment 7 of this report, and a complete list of participants may be found in Attachment 8.

Roundtable #1: Overcoming Impediments to Pension Fund Investments in Infrastructure

The first Roundtable was held at CalPERS headquarters in Sacramento on March 5, 2012, and was moderated by David Altshuler of Meketa. Approximately 50 people were in attendance, including representatives from across CalPERS (the Board of Administration, Executive Office, and Investment Office staff), public agencies, industry experts, and labor unions.

The agenda was designed to lay the groundwork for the subsequent Roundtables through a discussion of key considerations for pension system investment in infrastructure. Topics covered during this session included the suitability of infrastructure projects for investment, balancing interests of public and private stakeholders, current sources of infrastructure financing, pension system investment objectives and considerations, and the priorities and limitations of government agencies in procuring infrastructure funding.

Roundtable #2: Transportation

The second Roundtable, on Transportation, was held in San Francisco on April 5, 2012. It was moderated by Richard G. Little, the Director of the Keston Institute for Public Finance and Infrastructure at the University of Southern California. Approximately 55 people were in attendance.

In California, there is legislation in place to enable third-party investment in transportation, as well as a track record of private-sector involvement in transportation investment. Therefore, the discussion focused on specific transportation investment needs from the state and agency perspective, completed transactions, and future projects that could potentially be considered for pension investment. Representatives from Caltrans, San Francisco County Transportation Authority, Orange County Transportation Authority, Los Angeles Metropolitan Transportation Authority, San Diego Association of Governments, and the Metropolitan Transportation Commission/Bay Area Toll Authority, led discussions


on the current funding sources and needs at their respective agencies. The Roundtable also included presentations on legal considerations related to investment by public pensions in public infrastructure, and the legal and statutory frameworks for enabling P3s in California.

According to roundtable participants, sources of funding for transportation infrastructure in the current environment are diminishing. For example gas tax receipts, the primary source of state transportation funding, are down significantly and this shortfall is expected to contribute to an estimated $200 billion funding gap over the next decade. For the preservation of the current transportation system and expanding and managing the state’s transportation network over time, it is understood that Caltrans has only less than half its actual funding needs. State resources, including debt capacity will not be able to meet all of California’s transportation funding needs.

While the needs are significant, many aspects of transportation project development present challenges for pension investment, including long development times, a complex entitlement process, litigation risk, uncertainty of completion, and a limited track record of private investment participation.

Roundtable #3: Water

The third Roundtable, on Water, was held in Los Angeles on April 23, 2012 and was moderated by Tony Oliveira, a former CalPERS Board Member and currently a Professor at the University of California, Merced. Approximately 43 people were in attendance.

The discussion at the Water Roundtable was oriented towards mutual education between State and local agencies and CalPERS staff on funding needs and investment objectives. Representatives from the Department of Water Resources, Association of California Water Agencies, Metropolitan Water District of Southern California, Los Angeles Department of Water and Power, East Bay Municipal Utility District, and the Kings River Conservation District led discussions on water investment needs, including ongoing operations, maintenance, and upgrading of existing facilities, and the development of large-scale projects such as the Delta Conveyance Project. In addition, legal and finance experts presented on tax-exempt bond financing and potential structures to enable the use of private capital.

Historically, private investment in water infrastructure has been very limited, due primarily to the strong access to the tax-exempt debt market enjoyed among water agencies. However, according to estimates from the State Treasurer’s Office, State resources including debt capacity will not be sufficient to meet all statewide water needs. According to State Treasurer’s Office estimates, $186 billion in state water infrastructure investment is required over the next decade. Most investment needs are focused on improving the reliability of the current system rather than on population growth, as much of California’s critical water infrastructure is over 70 years old. It was noted that while the larger water agencies are highly rated and have strong access to the tax-exempt bond market, new borrowing will require that agencies raise rates to water contractors (users) in order to meet debt service obligations. Rate increases for users have historically been difficult to implement.


The following water infrastructure projects were discussed at the Roundtable:

• Repair, replacement, and rehabilitation projects focusing on upgrading aging infrastructure, supply diversification, and loss mitigation;

• Improving the reliability of the State’s water resources; • Water and wastewater treatment – both capacity building and to improve compliance with

regulation; • Water conservation, recycling and reclamation efforts projects; • Developing local water supplies to manage potential rate increases, increase cost

effectiveness, and buffer volatility in the supply from the State Water Project; and major projects, such as the Bay Delta Conveyance, that will require significant capital investment (estimates are between $17 and $20 billion) over decades.

For many of these projects, such as revenue-generating projects or large-scale projects with long lead times, there may be potential to structure opportunities for pension investment, to the extent that tax-exempt bond or federal funding for these projects is unavailable or insufficient.

Roundtable #4: Energy

The fourth Roundtable, on Energy, was held in San Diego on May 24, 2012, and was also moderated by Mr. Oliveira. Approximately 54 people were in attendance.

Since most energy facilities are already privately owned and operated, the agenda for the Energy Roundtable consisted of a series of presentations by private sector developers and sponsors of conventional and renewable generation and transmission projects in the U.S. regarding their experiences in California. Representatives from the California Energy Commission, the State’s primary energy policy, planning, and licensing agency, led a discussion on the state energy perspective, and two of California’s public utilities (San Diego Gas & Electric and Southern California Edison) led discussions on energy priorities and current projects within California. In addition, several private companies with significant experience developing energy facilities in California led discussions, which focused on many of the appealing fundamentals of the California energy market, and on some of the regulatory and environmental challenges facing new development in the state.

The pipeline of energy infrastructure projects in California is estimated to be between $50 and $100 billion and is driven by the following developments and trends:

• Forecasted demand growth continues to increase, driven by demographic trends; • The California Renewable Energy Resources Act (Senate Bill X 1-2) increased the state

Renewable Portfolio Standard (RPS), which requires California utilities to source 33% of power from renewable sources by 2020. This requires the development of, and investment in, renewable energy generation and transmission facilities. Solar power generation capacity is expected to grow by 900 megawatts between 2012 and 2016; and

• The need for both reliable and continuous base load generation sources, including natural gas, and new transmission facilities is expected to grow to accommodate the increasing use of intermittent renewable energy sources in the state’s power mix.


There is much opportunity for institutional investors including pension funds to finance energy investment needs within the state. Highly-rated electric utilities typically enter into long-term power purchase agreements with both renewable energy and natural gas generation facilities which provide project investors with revenue certainty and reduced risks associated with project development and asset utilization.


Section 4: Additional Outreach and Discussions

In addition to the four Roundtable events described above, CalPERS staff met with other representatives, agencies, and organizations to inform them of CalPERS interest in infrastructure investment, and to learn about these stakeholders’ perspectives on, and experiences regarding infrastructure investment, within California and across the nation.

California Outreach

Staff held conversations specifically focused on investment in California infrastructure with staff from the Governor’s and Legislative Offices. Staff presented Infrastructure Program information to the California Council of Governments; held a special meeting with Chambers of Commerce from across the state; and convened a special workshop at the Port of Long Beach regarding port-related investment opportunities. Staff met with state, regional, and local public agency officials and staff to discuss potential opportunities for pension system investment and their infrastructure needs.

Staff also participated in the creation of the new West Coast Infrastructure Exchange (the “Exchange”). As originally envisioned the Exchange will become an organization focused on ongoing efforts to build a nimble, new vehicle to promote financing of 21st century infrastructure investments along the West Coast and facilitate partnerships with infrastructure innovators in other regions. Once formally launched, the Exchange will serve as a non-profit regional network offering a range of value-added services that support regional-scale infrastructure investment and alignment among key stakeholders in California, Oregon and Washington. It is envisioned that the Exchange will be a center of expertise and a gateway to national and international investors for eligible infrastructure projects. While the Exchange will connect interested investors with potential investments, the vast bulk of deal-development efforts will happen at the state level, given each state’s unique differences in agency and statutory structure, the nature of project management and the role of local jurisdictions.

California leadership in the Exchange has been provided by the California State Treasurer’s Office and CalPERS. CalPERS staff’s role has been to provide information related to the institutional investor’s perspective on infrastructure investment. In its start-up phase, the Exchange is operating with a three-state interim management team, with fiscal sponsorship by the Oregon State Treasury.

The draft mission statement is as follows: The Exchange seeks to address the infrastructure gap and help achieve regional policy objectives including competitiveness, job creation, and climate change policy. We do this by:

• identifying value strategies to leverage public dollars, enable project sponsors, and increase measurable impact,

• creating and advancing new mechanisms for project finance and effective delivery, • sharing and developing best practices, • connecting investors to opportunities and collaborative data, • helping identify, understand and mitigate risk; and • strengthening public sector capacity and expertise.


National Outreach In addition to California outreach, staff held discussions with interested individuals and organizations regarding pension system investment in infrastructure across the country. These discussions included federal agency staff from the Environmental Protection Agency and Department of Treasury; and state treasurer’s offices across the country. Staff met with professional and stakeholder organizations including the Urban Land Institute, the Clinton Global Initiative, the Center for American Progress, American Federation of Labor and Congress of Industrial Organizations, American Federation of Teachers, and the Service Employees International Union. From these conversations staff has a better understanding of the interest and importance that stakeholder organizations place on the ancillary benefits that may result from pension system investment in infrastructure. Specifically, stakeholder groups articulated the need for strong economic growth to power investment returns for public pension systems, and the ability of pension systems to contribute to economic growth through investment strategies that result in job creation.


Section 5: Development of Investment Opportunities

CalPERS Infrastructure Outreach initiative has served as an effective program for development of contacts between CalPERS staff and key public sector staff responsible for infrastructure projects. Aside from conducting the aforementioned CalPERS Roundtables, and other public discussions which provided unique and valuable opportunities for staff and interested parties to network and share information, CalPERS Infrastructure Program staff conducted numerous one-on-one meetings with public sector bodies throughout the state.

Investment Office staff met with representatives of individual public sector bodies to discuss potential investment opportunities for CalPERS, including existing assets and projects in development. At these meetings, staff provided details as to the Infrastructure Program investment objectives and criteria, suggested projects and potential investment structures that it is interested in exploring with the public bodies, and emphasized potential advantages for these public bodies in working with CalPERS.

Through its outreach efforts, staff has sought to identify and develop investment opportunities in the following infrastructure sectors: transportation, ports, water, and energy and power. The results to date from early investigations and dialogue with key players in each of these sectors are as follows:

• Transportation Staff has developed a pipeline of transportation-related investment “prospects” and staff will continue to discuss with the relevant public agencies as the agencies work though the projects’ planning phases. These prospects include agency projects requiring substantial capital investment aimed at improving transportation efficiency and/or expanding capacity. Staff is also interested in exploring the potential for investment participation in certain brownfield assets held by public agencies.

• Ports Staff gained new insights regarding opportunities and risks associated with potential partnering with terminal operators and port authorities. Generally speaking, staff considers most ports-related opportunities to be at the higher-risk end of the infrastructure risk-return continuum. Port assets tend to be sensitive to economic activity and to competition from rival goods delivery routes and have a high degree of dependency on downstream goods-movement systems and facilities. Although no prospects are presently identified, CalPERS staff will continue to dialogue with entities involved in California’s ports sector.

• Water Given the public water agencies’ generally strong financial credit ratings and their ready and abundant access to tax-exempt financing, opportunities for CalPERS to invest directly in the agencies’ projects are few. However, there may be opportunities for CalPERS to provide credit support to municipal issuers through its credit enhancement program. Staff believes that opportunities for CalPERS Infrastructure Program are most likely to arise outside of the major public agencies, in connection with independent standalone projects in areas such as wastewater treatment, recycling, and water desalination.


• Energy & Power California’s energy and power sector has an active investment market with a variety of opportunities for private institutional investment. Staff has considered several opportunities and has participated in competitive processes to acquire power-related assets. Staff expects to continue to see opportunities as it has ongoing dialogue with various entities in the sector, including investor-owned utilities, independent power producers, and other institutional investors.

An important factor potentially limiting opportunities for investment by CalPERS Infrastructure Program in public infrastructure is the availability of low-cost, subsidized financing (e.g., grant funding; Transportation and Infrastructure Finance and Innovation Act (“TIFIA”) funding; tax exempt debt issuance). Nonetheless, staff believes that public sector agencies may be interested in considering alternatives in addition to subsidized sources of financing as the agencies’ infrastructure renewal and expansion needs increase, and their ability to access traditional subsidized financing sources becomes increasingly strained. Additionally, staff believes that over time the agencies may re-examine their estimates of the real lifecycle risks and costs of owning certain types of infrastructure investments and may seek to share these risks with investment partners such as public pension funds.

CalPERS Infrastructure staff has presented public sector agencies with its perspective on the benefits of partnering with CalPERS. Such benefits include: CalPERS can provide a competitive source of long-term capital, in addition to subsidized capital sources; the ability of CalPERS to have financial participation without adversely affecting agencies’ ability to access tax exempt financing; and the common interests and objectives that CalPERS and the agencies share as state public bodies.

In cases where public sector agencies have indicated potential interest in considering alternative financing sources, staff has encouraged the public agencies to consider working on a bilateral basis with CalPERS, including conducting discussions in the early stages of project financial planning. Staff’s strong preference is to work bilaterally toward agreements rather than to participate in costly and uncertain competitive bid auction processes.

Overall, CalPERS staff is making progress with developing in-state infrastructure opportunities for investment. As noted above, staff is actively pursuing transactions in the energy and power sector. In other areas, in particular the transportation sector, staff expects prospective opportunities to materialize gradually as the public sponsors address project planning and approval requirements.


Conclusion

CalPERS Infrastructure Outreach Effort established introductions and a continuing dialogue between staff and leaders throughout state and local government on the potential for pension system investment in infrastructure. The Outreach Effort was successful in large measure due to the commitment of the participants in preparing for and attending the Roundtables. CalPERS is very grateful to the many people who attended and contributed to the Outreach Effort.

The Roundtables provided a forum to raise issues and lay the groundwork for potential collaboration in the future. In Summary, key opportunities identified for pension system investment include:

• Vast unmet needs for investment in California infrastructure, for which available funding sources are not expected to be sufficient;

• California’s strong fundamentals, which make it an attractive destination for infrastructure investment; and

• CalPERS and other pension systems are attractive potential partners for California public agencies.

Roundtable participants identified current challenges to pension systems infrastructure investment in California, including:

• The availability of lower-cost, tax-exempt financing for many infrastructure projects; • The lack of a good fit between certain infrastructure projects and the framework of investment

policies and strategic objectives of institutional investors; and • Issues related to project development including complex regulations and other timelines.

While suitable opportunities for pension investment are still fairly limited at the present time, CalPERS Infrastructure Program staff is now actively engaged in developing specific in-state opportunities for investment.

Several recommendations regarding policy and legislative changes to facilitate investment in California infrastructure by pension systems were identified at the Roundtables. Some of the key recommendations for potential follow up by stakeholders and other interested parties include initiatives to:

• Develop more-flexible procurement methods for in-state agencies; • Streamline California environmental approval requirements; and • Renew existing legislation enabling Public Private Partnerships in California and consider

expanding its mandate.

Policy and legislative developments that provide greater flexibility in procurement and financing alternatives could help to generate opportunities for investment from public pensions and other institutional sources. In the meantime, CalPERS Infrastructure staff will continue to engage with public sector agencies to discuss the potential for partnering in new and existing projects.


California Public Employees’ Retirement System Investment Office P.O. Box 2749 Sacramento, CA 95812-2749 TTY: (877) 249-7442 (916) 795-3400 phone www.calpers.ca.gov

Agenda Item 7c September 12, 2011

TO: MEMBERS OF THE INVESTMENT COMMITTEE

I. SUBJECT: Infrastructure Investment in California II. PROGRAM: Infrastructure III. RECOMMENDATION: Information IV. ANALYSIS:

At the presentation of staff’s Infrastructure Strategic Plan (strategy) to the Investment Committee (Committee) in April 2011, Committee members indicated an interest in the subject of investment in infrastructure in California and accordingly, investment opportunities for CalPERS. To provide the Committee with information and an opportunity to discuss this subject, staff requested that the Board’s Infrastructure Consultant, Meketa Investment Group (Meketa), prepare a report on California infrastructure investment. Meketa’s presentation is provided as Attachment 1. Meketa’s report provides an assessment of the state of the infrastructure investment environment within California, noting the growing need for institutional investment to support public infrastructure, pointing out several conditions that have hindered such investment to date, and offering preliminary thoughts as to approaches that are needed and avenues that may be available to stimulate increased interest from institutional investors, including CalPERS. Given the sizable capital needs of California’s state and local governments to support essential public infrastructure, governments will need to expand institutional funding sources beyond the tax exempt bond market, and attract substantial and sustained interest from broader and deeper pools of institutional capital. Under the current government structure in the State of California, the process for identifying assets suitable for private sector partnering is complex and lengthy, with decision-making fragmented amongst various state agencies, authorities and local governments. In order to create a sustainable and efficient structure to meet California's long-term infrastructure funding needs, State government, working with expert advisors, should undertake the following initiatives: (1) establish clear objectives and policies around public infrastructure financing. Key


Members of the Investment Committee September 12, 2011 Page 2 of 3

policies would address, among other things, issues such as revenue sources and approaches to partnering with private capital; (2) conduct a comprehensive, state-wide review of infrastructure needs; and (3) develop a streamlined and efficient process for identifying and reviewing assets across state and local agencies and sectors that have realizable value, or are otherwise suitable for procurement through partnerships with the private sector. Where appropriate, CalPERS should participate in these efforts. Irrespective of current or future forms of the government’s policy and framework, CalPERS has put in place the necessary foundation for the Infrastructure Program (Program) to initiate, review and invest in California-based infrastructure opportunities. Staff believes that in the near term, the vast majority of attractive, investible opportunities will continue to emanate from privately held and publicly listed investor-owned companies and organizations. Investment types which fall into this category and which are representative of the Program’s current investment pipeline include power generation facilities, energy pipelines and storage, electric transmission, and utilities (energy and water). Investment opportunities are reviewed by staff in the context of the Program’s capital allocation, investment policy and strategy. The current target allocation is 2.0% of the Total Fund (three-year target of c. $5.0 billion). Within the allocation, Infrastructure policy targets U.S. investment of 40% to 80% (c. $2.0 to $4.0 billion). Based on the policy, the Infrastructure strategy is a blueprint for investment execution, focusing on risk analysis and suitable portfolio construction. Pursuant to this, staff recommends an investment allocation for California of up to 20% of the U.S. portion of the Program. This would serve to provide a significant focus on California whilst maintaining geographic diversification in the portfolio and mitigating undue geographic concentration risk. The following table outlines the Program’s targeted and maximum investment amounts based on the current allocation, policy and strategy:

Staff is keen to explore with public sector agencies, districts and authorities across the U.S., and particularly within California, opportunities which meet the Program’s investment requirements. These requirements are outlined in

Infrastructure Portfolio: 3-Year Time Horizon

($ millions) Portfolio Target Portfolio Maximum

U.S. 3,000 4,000

*California 600 800

**No. of CA Transactions 2-4 2-5

* CA at 20% of U.S. portfolio target and maximum

** Assumes average transaction size of $150 - 300 million, consistent with Strategic Plan



California Public Employees’ Retirement System Investment Office P.O. Box 2749 Sacramento, CA 95812-2749 TTY: (877) 249-7442 (916) 795-3400 phone www.calpers.ca.gov

Agenda Item 7 October 17, 2011

TO: MEMBERS OF THE INVESTMENT COMMITTEE I. SUBJECT: Infrastructure Investment in California – State and

Local Government Outreach Plan II. PROGRAM: Real Assets - Infrastructure Program III. RECOMMENDATION: Information – Update regarding Outreach Effort for

California Infrastructure Investment IV. ANALYSIS:

In April 2011, the Investment Committee approved the Infrastructure Program strategy for approximately $5 billion of investment capital. On September 12, 2011, the Investment Committee directed staff, among other things, to: Target investment of up to $800 million in California infrastructure over a

three year period; and

Develop a plan for outreach to state and local governments to explore what role CalPERS and other U.S. pension systems can play to facilitate infrastructure investment in California.

Staff was requested to return to the Committee in October with its outreach plan including identification of staff and resource needs. This Agenda Item provides staff’s plan to outreach to state and local government entities regarding investment in California infrastructure (the “Outreach Effort”). The Outreach Effort is designed to address two overarching objectives of the Committee’s Motion:

1) Coordination and Policy Process. Conduct a broad array of discussions to

increase the potential for investment in California infrastructure by CalPERS and other pension systems with whom CalPERS may partner; and


Members of the Investment Committee October 17, 2011 Page 2 of 6

2) Investment Pipeline Process. Enhance the current infrastructure investment pipeline and execute investments in California-based infrastructure businesses and projects.

Approach to Outreach The Coordination and Policy Process will entail: a) multi-party, roundtable workshop meetings and open engagement on pertinent policy and legislative initiatives. This process will: Provide opportunities for stakeholders to share information regarding project

delivery and service goals, and perspectives on opportunities and challenges;

Provide stakeholders with information about CalPERS investment programs and initiatives;

Identify policy changes that could make infrastructure investments by pension

plans more viable; and

Provide opportunities to explore how CalPERS may best contribute to improve the conditions, and increase the potential for infrastructure investment by pension funds.

The Investment Pipeline Process will be one-on-one, private meetings to explore potential opportunities for investment by CalPERS. The one-on-one meetings between CalPERS Infrastructure investment staff and key State and local agencies will serve to:

Increase mutual awareness between CalPERS and government agencies of

mandates, goals, initiatives and projects;

Strengthen the investment staff’s network of contacts for California infrastructure investment; and

Potentially stimulate development of a pipeline of suitable opportunities for

investment.

Implementation and Reporting

Staff proposes to undertake the following activities in connection with its Outreach Effort:



1. Coordination and Policy Process: Real Assets staff in collaboration with External Affairs staff will: a) Within six months, organize and lead two to four roundtable workshops on California Infrastructure, involving representatives from a selection of major public sector agencies, pension systems, and advisors with expertise on public infrastructure policy, financing and procurement;

b) Document and report to the Investment Committee key findings and recommendations arising from the workshops;

c) Openly engage with key stakeholders and market participants to discuss public policy and legislative initiatives pertinent to infrastructure investment in California; and

2. Investment Pipeline Process: Infrastructure Program staff will:

a) Within six months, engage in one-on-one meetings with at least one dozen key State and local government agencies to explore opportunities for investment;

b) Provide to the Investment Committee a confidential report regarding potential investment opportunities arising from the one-on-one meetings; and

c) Pursue suitable opportunities for investment on an ongoing basis.

In addition to the aforementioned outreach activities, earlier this month staff participated in two important industry events: 1) the roundtable workshop, California Infrastructure – A Path to Economic Recovery and Jobs, held by the California Foundation on the Environment and the Economy on October 10-11, 2011; and 2) the USDA Investment Roundtable to discuss infrastructure investment in rural America, held by the United States Department of Agriculture in New York on October 6, 2011. Staff anticipates that there will be abundant opportunities for dialogue with public sector officials and pension investors regarding domestic infrastructure investment. Staff welcomes such opportunities for dialogue, but nonetheless will be judicious as it pertains to expenditures of time, effort and cost.

Staff Resource Requirements The Infrastructure Program is presently staffed below levels prescribed within the Infrastructure Strategic Pan (April 2011), which did not incorporate consideration



of any demands related to the Outreach Effort. Staff intended to request the additional resources identified in the Infrastructure Strategic Plan for the 12/13 budget year. In light of the increased emphasis on investment in California infrastructure, staff now plans to accelerate this resource request. Staff will request two planned investment staff positions plus one administrative position for the Infrastructure team through the CalPERS mid-year budget approval process.

Aside from Infrastructure Program resources, the Chief Investment Officer has given direction for recruitment of a Senior Portfolio Manager dedicated to providing broad leadership and coordination for key cross-asset-class initiatives, including California investment. Laurie Weir, Portfolio Manager, Real Assets has been asked to fulfill this role on an interim basis. This position can be funded from within the existing Investment Office budget. Staff intends to request through CalPERS mid-year budget process the approval of: One additional Investment Officer III position to report to the SPM. This

position will be focused generally on California related investments and initiatives across the total fund; and will focus specifically on work associated with the Coordination and Policy Process related to investment in California infrastructure.

CONCLUSION Staff proposes a dual-track Outreach Effort which involves, a), multi-party roundtable workshops and open engagement to explore potential roles for CalPERS and other pension systems in facilitating infrastructure investment in California, and b), one-on-one investment meetings focused on exploring investment opportunities with key State and local agencies. To support staff’s immediate efforts and its ongoing efforts to maintain an intensive focus on investment in California, while continuing to support the broader management and growth requirements of the Infrastructure Program, staff will pursue approval for accelerated recruitment of Infrastructure staff resources and one additional resource to support the Coordination and Policy Process effort.



V. RISKS:

There are no risks associated with this information item.

VI. STRATEGIC PLAN: This item supports the following strategic goals:

Goal VIII: Manage the risk and volatility of assets and liabilities to ensure sufficient funds are available, first to pay benefits and second, to minimize and stabilize contributions.

Goal IX: Achieve long-term, sustainable risk adjusted returns. VII. RESULTS/COSTS:

Costs associated with this initiative are anticipated to be roughly $80,000 to mainly cover staff travel costs and costs associated with hosted roundtable events, plus approximately $140,000 of personnel cost (including benefits) for an additional resource to support the Coordination and Policy Process efforts. The estimate excludes expenses related to additional Infrastructure investment staff resources, because these costs were part of the Infrastructure strategic plan and would have been incurred regardless of this initiative.



DEBT TERM SHEET

Target Investments:

Defensive assets or Defensive Plus assets as described in CalPERS Infrastructure Strategic Plan. Essential assets with monopoly characteristics under proven regulation or with acceptable long term contractual regimes.

Asset Types:

Roads, bridges, tunnels, rail, airports, ports, natural-gas fired power generation, renewable power generation, electric transmission, energy midstream (pipelines, oil & gas storage, LNG), electric and gas utilities, water pipelines, water and waste water utilities, desalination facilities, essential communications systems and social infrastructure.

Eligible Investments:

Stable, long-lived, cash generating assets with high levels of execution certainty, consisting of:

• Availability-based Public-to-Private Partnerships (“P3”) (subject to revenue and cash flow certainty under commercially acceptable appropriations schemes and suitable financial strength of procuring authority);

• Brownfield Toll/User-Fee based P3 (subject to acceptable volume history and forecast; acceptable toll/user fee regime);

• Contracted electric transmission, power generation, energy midstream, water and waste (subject to acceptable contract terms and counterparty credit quality);

• Regulated utilities: electric, gas, integrated, water, waste water, communications/cable (subject to acceptable regulatory regimes)

Greenfield Assets: No development/entitlement risk (all key permits, approvals,

required contracts, easements etc. are in place). Minimal construction risk, mitigations consisting of, but not limited to, acceptable Engineering Procurement Construction and/or Design Build Agreements with market based liability caps, liquidated damages, bonding and liquidity/security enhancement.

Operating Agreements:

Where applicable, acceptable long-term Operations & Maintenance Agreements from suitable parties with market based terms including termination provisions, liquidated damages etc.

Debt Structures: Taxable senior secured floating rate loans or notes or subordinated floating rate loans or notes.

Reference Index: Monthly/quarterly U.S. CPI or U.S. LIBOR.


Floors; OID: Reference Index floors and original issue discount where applicable.

Spread: Minimum 4.00% over U.S. CPI or equivalent over U.S. LIBOR. To be determined on a transaction by transaction basis.

Tenor: 5-20 years, subject to market terms at the time of issuance.

Amortization: Partially amortizing subject to market terms, contract tenors and required covenants.

Covenants: Market based and consisting of but not limited to minimum debt service coverage ratios, maximum debt to capital ratios, maximum debt-to-ebitda ratios etc.

Required Security: Senior secured - pledge of all assets, revenues and/or contracts as applicable. Subordinated - to be determined investment to investment.

CalPERS Target Investment Size:

$150 - $300 million per transaction.

CalPERS Maximum Investment:

CalPERS maximum investment to be determined transaction by transaction depending on total size of offering, number of syndicate members, legislative restrictions (if any) and Internal Revenue Code (IRC) restrictions including applicable portions of IRC section 503 (IRC section which outlines transactions prohibited for tax exempt entities and governmental plans).

Credit Quality: BB/Ba2 or higher credit rating from one or more of the major credit rating agencies.

Due Diligence: Commercial due diligence consisting of legal, technical/engineering, environmental, pricing, volume, regulation, financial (including detailed financial models), tax, accounting, insurance, forecast market conditions etc.


EQUITY TERM SHEET

Target Investments:

Defensive or Defensive Plus assets as described in CalPERS Infrastructure Strategic Plan. Essential assets with monopoly characteristics under proven regulation or with acceptable long term contractual regimes.

Asset Types:

Roads, bridges, tunnels, rail, airports, ports, natural-gas fired power generation, renewable power generation, electric transmission, energy midstream (pipelines, oil & gas storage, LNG), electric and gas utilities, water pipelines, water and waste water utilities, desalination facilities, essential communications systems and social infrastructure.

Eligible Investments:

Stable, long-lived, cash generating assets with high levels of execution certainty, consisting of:

• Availability-based Public-to-Private Partnerships (“P3”) (subject to revenue and cash flow certainty under commercially acceptable appropriations schemes and suitable financial strength of procuring authority);

• Brownfield Toll/User-Fee based P3 (subject to acceptable volume history and forecast; acceptable toll/user fee regime);

• Contracted electric transmission, power generation, energy midstream, water and waste (subject to acceptable contract terms and counterparty credit quality);

• Regulated utilities: electric, gas, integrated, water, waste water, communications/cable (subject to acceptable regulatory regimes)

Greenfield Assets: No development/entitlement risk (all key permits, approvals,

required contracts, easements etc are in place). Minimal construction risk, mitigations consisting of, but not limited to, acceptable Engineering Procurement Construction and/or Design Build Agreements with market based liability caps, liquidated damages, bonding and liquidity/security enhancement.

Operating Agreements:

Where applicable, acceptable long-term Operations & Maintenance Agreements from suitable parties with market based terms including termination provisions, liquidated damages etc.

Investment Structures:

Direct investments in the form of preferred or common equity through commercial structures and legal forms (LLCs, C Corps, other).

Leverage: Debt in the capital structure required to have a minimum BBB- or Baa3 credit rating from one or more acceptable, major credit rating


agencies. All leverage to be non-recourse to CalPERS.

Cash Yield: Targeted average annual cash yields dependent upon nature of the investment. Strong preference for investments with higher cash yields and those which provide cash dividends in all stages of the investment.

Net Real Equity Return Requirements:

Common Equity Minimum 4.0 – 8.0% in US Dollars. Return requirements adjusted for risk, tenor, and subject to acceptable inflation protection and/or linkage. Preferred Equity To be determined on investment by investment basis.

CalPERS Target Investment Size:

$150 - $300 million per transaction.

Partners: CalPERS’ partners to consist of experienced and reputable firms/enterprises of significant financial size and strength with like-minded goals and objectives with respect to the asset/investment.

Ownership & Governance:

CalPERS seeks to make investments which provide significant minority investment stakes and significant shareholder rights. Governance and shareholder terms TBD with respect to each investment and consistent with the size of CalPERS’ stake and the nature of the investment/asset.

Exit Rights: No restrictions on CalPERS exit.

Due Diligence: Commercial due diligence consisting of legal, technical/engineering, environmental, pricing, volume, regulation, financial (including detailed financial models), tax, accounting, insurance, forecast market conditions etc.


Infra

stru

ctur

e S

trate

gic

Pla

n Su

mmar

y

Rand

all M

ullan

, Sen

ior P

ortfo

lio M

anag

er

Infra

struc

ture &

For

estla

nd G

roup

Septe

mber

201

1


Infra

struc

ture

Stra

tegic

Plan

Sum

mary

Inves

tmen

t Plan

High

lights

•

Prog

ram

targe

t size

set a

t 2.0%

of C

alPER

S’ T

otal F

und (

c. $5

.0 bil

lion)

•

Low-

risk f

ocus

, matc

hed

to the

Pro

gram

’s Be

nchm

ark a

nd S

trate

gic R

ole:

-At

leas

t 90%

inve

sted i

n ‘De

fensiv

e’ an

d ‘De

fensiv

e Plus

’ risk

-retur

n cate

gorie

s; •

Stea

dy in

come

and c

ash y

ields

; •

Mode

st do

wnsid

e risk

; •

Inflat

ion pr

otecti

on

-US

-centr

ic: 4

0% to

80%

inve

sted i

n the

US

•

Inves

tmen

t app

roac

h em

phas

izes:

-

Long

-term

holds

; -

Inves

tmen

t size

prefe

renc

e: m

inimu

m $1

50 m

illion

; -

In-ho

use d

iscre

tion o

ver c

apita

l dep

loyme

nt, as

set s

electi

on an

d liqu

idity;

-

Sign

ifican

t mino

rity st

akes

; -

Inves

t with

stro

ng, r

eputa

ble an

d like

-mind

ed pa

rtner

s.


Infra

struc

ture

Stra

tegic

Plan

Sum

mary

Stra

tegic

Role

of Inf

rastr

uctur

e •

The P

rogr

am’s

Stra

tegi

c Rol

e was

defin

ed th

roug

h Ca

lPER

S’ A

sset

Alloc

ation

Rev

iew pr

oces

s. It

was

deter

mine

d tha

t Infra

struc

ture i

nves

tmen

ts ca

n play

a un

ique,

strate

gic ro

le wi

thin t

he to

tal fu

nd by

prov

iding

: -

Stea

dy R

etur

ns an

d Ca

sh Y

ields

– re

gulat

ed

and/o

r con

tracte

d rev

enue

s and

oper

ating

costs

pr

ovide

inve

stmen

t retu

rn ce

rtaint

y and

stab

ility;

-

Defe

nsive

Gro

wth

– the

esse

ntial

and

prote

cted/n

on-co

mpeti

tive n

ature

of in

frastr

uctur

e as

sets

insula

tes re

turns

again

st pr

ice, d

eman

d and

gr

owth

risks

; -

Infla

tion

Prot

ectio

n – t

he pr

esen

ce of

dire

ct an

d ind

irect

inflat

ion-lin

kage

s ser

ve to

pres

erve

real

asse

t valu

es ov

er tim

e; an

d -

Dive

rsifi

catio

n Be

nefit

s – pr

ivate

infra

struc

ture i

s an

ticipa

ted to

demo

nstra

te low

corre

lation

to fix

ed

incom

e and

listed

equit

ies.

Pr

ogra

m Be

nchm

ark:

Ro

lling 5

-year

U.S

. CPI

+ 40

0 bps


Infra

struc

ture

Stra

tegic

Plan

Sum

mary

Inves

tmen

t Scre

ening

•

Sear

ch fo

r high

-qua

lity, s

uitab

le op

portu

nities

, with

a hig

h pro

babil

ity o

f suc

cess

ful co

mplet

ion.

Ass

et R

isk

/ Ret

urn

•G

eogr

aphi

c lo

catio

n•

Cur

renc

y ris

k•

Nat

ure

of s

ale/

selle

r•

Rev

enue

risk

•O

pera

ting

& ca

pita

l cos

t ris

k•

Con

tract

qua

lity

•R

egul

atio

n •

Con

stru

ctio

n ris

k•

Dev

elop

men

t ris

k•

Polit

ical

risk

•

Infla

tion

attri

bute

s•

Term

inal

val

ue

Part

nerin

g &

Alig

nmen

t

•Pa

rtner

pro

file

& af

finity

•Ex

perie

nce

& ab

ility

•Tr

ack

reco

rd•

Inve

stm

ent o

bjec

tives

•C

onfli

cts

•‘A

t-ris

k’in

vest

men

t•

Gov

erna

nce

stru

ctur

e &

term

s•

Fina

ncia

l siz

e &

stre

ngth

•Fe

es &

ince

ntiv

es

Cer

tain

ty o

f Suc

cess

Res

ourc

e A

vaila

bilit

y

Pass

/ Pu

rsue


Infra

struc

ture

Stra

tegic

Plan

Sum

mary

Asse

t-leve

l Risk

/Retu

rn

•Th

e Pro

gram

’s as

set-le

vel ri

sk-re

turn f

rame

work

is tai

lored

arou

nd th

e uniq

ue, in

here

nt de

fensiv

e qu

alitie

s of e

ssen

tial in

frastr

uctur

e. •

Base

d on d

etaile

d ana

lysis

of idi

osyn

cratic

retur

n an

d risk

facto

rs, op

portu

nities

are c

lassif

ied

withi

n an a

sset-

level

risk/r

eturn

spec

trum

with

the fo

llowi

ng th

ree c

atego

ries:

‘Def

ensiv

e’

- dow

nside

-pro

tected

or r

esilie

nt / lo

w ris

k ‘D

efen

sive P

lus’

- d

owns

ide-p

rotec

ted o

r res

ilient

/ mod

erate

risk

‘Ext

ende

d’

- less

prote

ction

or re

silien

cy / h

igher

risk

Quali

ties o

f ‘De

fens

ive’ In

frast

ruct

ure

•

Esse

ntial

asse

ts an

d ser

vices

•

GDP-

resil

ient /

dema

nd-in

elasti

c / pr

icing

certa

inty

•

Minim

al co

mpeti

tion /

stro

ng en

try ba

rrier

s / m

onop

olisti

c or

lon

g-ter

m-co

ntrac

ted bu

sines

ses

•St

able

reve

nues

and r

eturn

s / ra

te-re

gulat

ed, o

r long

-term

-co

ntrac

ted re

venu

es

•Lo

w op

erati

ng ris

k / al

lowed

cost

reco

very

•Inf

lation

linka

ges /

prote

ction

•St

rong

cred

it qua

lity of

f-tak

ers o

r pay

ers

•Ca

sh-g

ener

ative

busin

esse

s •

Long

-lived

tang

ible a

ssets

•

Low

obso

lesce

nce r

isk

•Lo

w / n

o dev

elopm

ent ri

sk

•Lo

w / n

o cur

renc

y risk


Infra

struc

ture

Stra

tegic

Plan

Sum

mary

Risk

/Retu

rn F

rame

work

•Th

e risk

/retur

n fra

mewo

rk inc

orpo

rates

pertin

ent a

sset-

level

risk a

nd re

turn f

actor

s for

Infra

struc

ture

inves

tmen

ts

DEF

ENSI

VED

EFEN

SIVE

PL

US

EXTE

ND

ED

Investment Risks / Return Drivers

Low

R

egul

ated

reve

nues

/ear

ning

sor

long

term

, hig

h qu

ality

con

trac

ts

Pred

icta

ble

timin

g an

d am

ount

. O

ften

an a

dditi

on to

rate

bas

eun

der u

tility

regu

latio

n Pr

edic

tabl

e/st

able

ass

et v

alue

dr

iven

by

rate

-bas

e or

long

-term

co

ntra

cted

cas

h flo

ws

Hig

h de

gree

of

long

term

infla

tion

prot

ectio

n

Hig

hly

pred

icta

ble

dem

and/

very

low

vol

ume/

user

risk

.H

igh

inel

astic

ity

(45

–90

%)

Inve

stm

ent G

rade

Low

-M

oder

ate

Le

ss c

erta

in p

rice

regu

latio

n an

d/or

addi

tiona

l con

trac

t ris

k

Pred

icta

ble

timin

g an

d am

ount

.O

ften

an a

dditi

on to

rate

bas

eun

der u

tility

regu

latio

n.

Sam

e as

Def

ensi

ve

with

low

-to-m

oder

ate

relia

nce

on te

rmin

al v

alue

(“TV

”)

Mod

erat

e-to

-hig

h de

gree

of

long

term

infla

tion

prot

ectio

n

Mod

erat

e-to

-hig

hly

pred

icta

ble

Dem

and/

low

vol

ume

or u

ser r

isk

Mod

erat

e in

elas

ticity

(30

–75

%)

BB

or b

ette

r

Mod

erat

e -H

igh

Ass

ets/

busi

ness

es s

ubje

ct to

hig

her

degr

ees

of p

rice

com

petit

ion

Tim

ing

and

amou

nt c

an b

e le

sspr

edic

tabl

e du

e to

exp

osur

e to

com

petit

ion

or n

eed

to g

row

. A

sset

val

ue le

ss p

redi

ctab

le/s

tabl

edu

e to

less

cer

tain

cas

h flo

ws

&gr

eate

r rel

ianc

e on

gro

wth

& T

V

Pric

e an

d de

man

d ris

ks

resu

lt in

low

er lo

ng te

rmin

flatio

n pr

otec

tion

Low

dem

and

pred

icta

bilit

y/hi

ghvo

lum

e or

use

r ris

kH

ighe

r lev

el o

f ela

stic

ity

(0 –

40%

) B

B o

r bet

ter

Prov

en e

ngin

eerin

g/te

chno

logy

; Lo

w c

onst

ruct

ion

risk

Prov

en e

ngin

eerin

g/te

chno

logy

;Lo

w c

onst

ruct

ion

risk

May

invo

lve

less

pro

ven

engi

neer

ing/

tech

nolo

gy a

nd/o

r m

oder

ate

cons

truc

tion

risk

Low

Hig

hR

isk/

Ret

urn/

Gro

wth

Part

ners

/Alig

nmen

t/Gov

erna

nce

Cur

renc

y/FX

, Reg

ulat

ory,

Leg

al, P

oliti

cal

Pric

e R

isk

Cap

ital

Expe

nditu

re

Ass

etVa

lue

Infla

tion

Effic

ient

Deb

t Lev

els/

Cre

dit Q

ualit

y

Dem

and/

Volu

me

Ris

k

Engi

neer

ing

&

Con

stru

ctio

n

Rev

enue

Cos

ts

Bal

ance

Shee

t

Oth

er &

Non

-Fi

nanc

ial

Ope

ratin

g C

osts

Pr

edic

tabl

e am

ount

s of

ten

with

re

gula

tory

pas

s-th

roug

h or

lo

ng-te

rm c

ontr

acts

Pred

icta

ble

amou

nts

ofte

n w

ithre

gula

tory

pas

s-th

roug

h or

long

-term

con

trac

ts

Can

be

less

pre

dict

able

due

to la

ck o

f reg

ulat

ory

pass

-th

roug

h or

abi

lity

to c

ontr

act

Valu

atio

n

DEF

ENSI

VED

EFEN

SIVE

PL

US

EXTE

ND

ED

Investment Risks / Return Drivers

Low

R

egul

ated

reve

nues

/ear

ning

sor

long

term

, hig

h qu

ality

con

trac

ts

Pred

icta

ble

timin

g an

d am

ount

. O

ften

an a

dditi

on to

rate

bas

eun

der u

tility

regu

latio

n Pr

edic

tabl

e/st

able

ass

et v

alue

dr

iven

by

rate

-bas

e or

long

-term

co

ntra

cted

cas

h flo

ws

Hig

h de

gree

of

long

term

infla

tion

prot

ectio

n

Hig

hly

pred

icta

ble

dem

and/

very

low

vol

ume/

user

risk

.H

igh

inel

astic

ity

(45

–90

%)

Inve

stm

ent G

rade

Low

-M

oder

ate

Le

ss c

erta

in p

rice

regu

latio

n an

d/or

addi

tiona

l con

trac

t ris

k

Pred

icta

ble

timin

g an

d am

ount

.O

ften

an a

dditi

on to

rate

bas

eun

der u

tility

regu

latio

n.

Sam

e as

Def

ensi

ve

with

low

-to-m

oder

ate

relia

nce

on te

rmin

al v

alue

(“TV

”)

Mod

erat

e-to

-hig

h de

gree

of

long

term

infla

tion

prot

ectio

n

Mod

erat

e-to

-hig

hly

pred

icta

ble

Dem

and/

low

vol

ume

or u

ser r

isk

Mod

erat

e in

elas

ticity

(30

–75

%)

BB

or b

ette

r

Mod

erat

e -H

igh

Ass

ets/

busi

ness

es s

ubje

ct to

hig

her

degr

ees

of p

rice

com

petit

ion

Tim

ing

and

amou

nt c

an b

e le

sspr

edic

tabl

e du

e to

exp

osur

e to

com

petit

ion

or n

eed

to g

row

. A

sset

val

ue le

ss p

redi

ctab

le/s

tabl

edu

e to

less

cer

tain

cas

h flo

ws

&gr

eate

r rel

ianc

e on

gro

wth

& T

V

Pric

e an

d de

man

d ris

ks

resu

lt in

low

er lo

ng te

rmin

flatio

n pr

otec

tion

Low

dem

and

pred

icta

bilit

y/hi

ghvo

lum

e or

use

r ris

kH

ighe

r lev

el o

f ela

stic

ity

(0 –

40%

) B

B o

r bet

ter

Prov

en e

ngin

eerin

g/te

chno

logy

; Lo

w c

onst

ruct

ion

risk

Prov

en e

ngin

eerin

g/te

chno

logy

;Lo

w c

onst

ruct

ion

risk

May

invo

lve

less

pro

ven

engi

neer

ing/

tech

nolo

gy a

nd/o

r m

oder

ate

cons

truc

tion

risk

Low

Hig

hR

isk/

Ret

urn/

Gro

wth

Part

ners

/Alig

nmen

t/Gov

erna

nce

Cur

renc

y/FX

, Reg

ulat

ory,

Leg

al, P

oliti

cal

Pric

e R

isk

Cap

ital

Expe

nditu

re

Ass

etVa

lue

Infla

tion

Effic

ient

Deb

t Lev

els/

Cre

dit Q

ualit

y

Dem

and/

Volu

me

Ris

k

Engi

neer

ing

&

Con

stru

ctio

n

Rev

enue

Cos

ts

Bal

ance

Shee

t

Oth

er &

Non

-Fi

nanc

ial

Ope

ratin

g C

osts

Pr

edic

tabl

e am

ount

s of

ten

with

re

gula

tory

pas

s-th

roug

h or

lo

ng-te

rm c

ontr

acts

Pred

icta

ble

amou

nts

ofte

n w

ithre

gula

tory

pas

s-th

roug

h or

long

-term

con

trac

ts

Can

be

less

pre

dict

able

due

to la

ck o

f reg

ulat

ory

pass

-th

roug

h or

abi

lity

to c

ontr

act

Valu

atio

n


Infra

struc

ture

Stra

tegic

Plan

Sum

mary

Portf

olio D

esign

Par

amete

rs Po

rtfo

lio A

lloca

tion

Inve

stm

ent R

isk/

Type

R

ange

Ta

rget

Min

imum

Rea

l Ret

urn

Targ

ets

Def

ensi

ve

25%

- 75

%

50%

4.

0% -

5.0%

Def

ensi

ve P

lus

25%

- 65

%

45%

5.

0% -

8.0%

Exte

nded

0%

- 10

%

5%

8.0%

+

List

ed (S

ub-A

lloca

tion)

0%

- 10

%

5%

4.0%

- 8.

0%

Geo

grap

hic

Allo

catio

n

Loca

tion

Ran

ge

Targ

et

USA

40

% -

80%

60

%

Dev

elop

ed O

ECD

(ex

US)

20

% –

50%

35

%

Less

Dev

elop

ed M

arke

ts

0% -

10%

5%

Leve

rage

Portf

olio

Ave

rage

≤

65%

Dis

cret

e Eq

uity

Inve

stm

ent

Whe

re >

50%

→ m

inim

um c

redi

t qua

lity

of B

BB- o

r eq

uiva

lent

Deb

t Sec

uriti

es

≥ BB

or e

quiv

alen

t

Cur

renc

y &

Inte

rest

Rat

e R

isk

Hed

ging

of f

orei

gn e

xcha

nge

and

inte

rest

rate

risk

whe

re a

pplic

able


FACT SHEET

CalPERS Infrastructure Program

In 2007 CalPERS initiated an infrastructure investment pilot program designed to invest in projects and businesses involved in key infrastructure sectors including the transportation, water, communications, and energy and power sectors. In 2011 CalPERS established a new Investment Policy, capital allocation, and Strategic Plan for its Infrastructure Program. Additionally, consistent with the new framework for the Program CalPERS Board approved targeting up to $800 million for investments in California infrastructure over three years. ROLE OF INFRASTRUCTURE INVESTMENTS

Designed to invest to capitalize on the inherent defensive nature of essential infrastructure assets, CalPERS Infrastructure Program has a unique, strategic role within CalPERS total fund. That role is to provide steady returns and cash yields, inflation protection, and investment diversification for the total fund. CURRENT CALPERS INFRASTRUCTURE PROGRAM AT-A-GLANCE

(AS AT 6/30/2012)

Commitments: $1.09 billion

Net Asset Value (NAV): $1 billion

NAV - U.S. Investments (ex. CA): $395 million

NAV - CA Investments: $94 million in state

Investment Return: 19 percent IRR (since inception as of 3/31/2012)

PROGRAM INVESTMENT FOCUS

The Program invests in both public and private infrastructure involving roads, bridges, tunnels, rail, seaports, airports, power generation, power transmission, oil and gas pipelines and storage, electric and gas utilities, and water and wastewater facilities.


PROGRAM INVESTMENT TARGETS

Total Program Size: • Targeted to increase to 2 percent of CalPERS total fund, equating to approximately $5 billion

Individual Investment Size: • $150 million or greater investment from CalPERS

Geographic Focus: • US Target Range: 40-80 percent (up to c. $4 billion)

• California Target: 20 percent of US (up to c. $800 million)

Risk-Return Profile: • “Defensive” Infrastructure – 50% target - Minimal competition; reliable revenues; low operating risk;

moderate inflation protection; cash generating; and minimal downside risk

• “Defensive Plus” Infrastructure – 45% target

- Significant defensive qualities, although with a greater degree of risk associated with factors such as competition, user patronage, regulation, contracts, construction, capital expenditure, growth and terminal value

• “Extended” Infrastructure – 5% target

- Infrastructure businesses subject to significant risk associated with some of the following elements: competition; merchant business; growth; construction; development; technology; operating costs; pricing; capital expenditure; terminal value; commodity prices; legal/political/regulatory regime; and currency


10

0 L

OW

DE

R B

RO

OK

D

RI

VE

S

UI

TE

1

10

0

WE

ST

WO

OD

M

A

0

20

90

7

81

4

71

3

50

0

F

AX

7

81

4

71

3

41

1

10

01

B

RI

CK

EL

L B

AY

D

RI

VE

S

UI

TE

2

00

0

MI

AM

I,

F

L

3

31

31

3

05

3

41

2

90

0

F

AX

3

05

3

41

2

14

2

57

96

A

RM

AD

A D

RI

VE

S

UI

TE

1

10

C

AR

LS

BA

D

C

A

9

20

08

7

60

7

95

3

45

0

F

AX

7

60

7

95

3

44

5

M

E

K

E

T

A

I

N

V

E

S

T

M

E

N

T

G

R

O

U

P

ww

w.m

eket

ag

rou

p.c

om

Augu

st 2

011

C

ALIF

ORN

IA IN

FRAS

TRU

CTU

RE IN

VEST

MEN

T O

VERV

IEW


Mek

eta

Inve

stm

ent G

roup

Exec

utiv

e Su

mm

ary

1

This

docu

men

tpr

ovid

esan

over

view

and

prel

imin

ary

asse

ssm

ent

ofop

portu

nitie

sfo

rin

vest

men

tby

publ

icpe

nsio

nfu

nds

inC

alifo

rnia

infra

stru

ctur

e.In

the

first

sect

ion,

we

revi

ewth

ecu

rren

tIn

vest

men

tPo

licy

and

stra

tegi

cob

ject

ives

ofC

alPE

RS’

Infra

stru

ctur

ePr

ogra

m,

whi

chse

tfo

rthth

eris

k,re

turn

,an

ddi

vers

ifica

tion

crite

riath

atgu

ide

the

Prog

ram

’sin

vest

men

tac

tivity

.A

lthou

ghth

ese

guid

elin

esar

esp

ecifi

cto

Cal

PERS

,th

eysh

are

man

ycr

iteria

and

obje

ctiv

esw

ithin

frast

ruct

ure

inve

stm

entp

rogr

ams

atot

herp

ublic

pens

ion

fund

s.Fo

llow

ing

abr

ief

back

grou

ndof

infra

stru

ctur

ein

vest

men

tin

Cal

iforn

ia,

the

next

sect

ions

cons

ider

the

curr

ent

limita

tions

toin

vest

men

tin

publ

ican

dpr

ivat

ein

frast

ruct

ure.

The

final

sect

ion

sugg

ests

aven

ues

that

may

beex

plor

edan

dpu

rsue

din

orde

rto

gene

rate

oppo

rtuni

ties

for

incr

ease

dpa

rtner

ship

betw

een

Cal

PERS

and

Cal

iforn

ia’s

publ

icag

enci

esin

infra

stru

ctur

ein

vest

men

t.


Mek

eta

Inve

stm

ent G

roup

Exec

utiv

e Su

mm

ary

2

Our

prel

imin

ary

conc

lusio

nsar

eas

follo

ws:

•Pu

blic

owne

rshi

pan

dop

erat

ions

ofin

frast

ruct

ure

and

the

relia

nce

onpu

blic

finan

cing

sour

ces

fori

nfra

stru

ctur

ede

velo

pmen

t,ha

vere

stric

ted

inve

stm

entp

artic

ipat

ion

inpu

blic

infra

stru

ctur

eby

third

-par

tyin

stitu

tiona

linv

esto

rs,i

nclu

ding

publ

icpe

nsio

nfu

nds.

•O

ppor

tuni

ties

toin

vest

inpr

ivat

ein

frast

ruct

ure,

onth

eot

her

hand

,ar

ere

lativ

ely

abun

dant

,as

ther

ear

efe

wer

impe

dim

ents

toin

vest

men

t.Ye

tce

rtain

regu

lato

ryco

nditi

ons

have

limite

dth

esc

ale

ofsu

chin

vest

men

tto

date

.

•C

alifo

rnia

has

been

ale

ader

indr

aftin

gle

gisla

tion

topr

omot

epr

ivat

epa

rtic

ipat

ion

inin

frast

ruct

ure

inve

stm

ent.

How

ever

,in

orde

rto

attra

ctin

stitu

tiona

linv

estm

ent,

stat

ean

dlo

calg

over

nmen

tsm

ust

beab

leto

crea

tein

vest

ible

oppo

rtuni

ties

and

cred

ible

/relia

ble

trans

actio

npr

oces

ses.

•To

the

exte

ntth

atgo

vern

men

tal

entit

ies

are

prep

ared

for

dial

ogue

arou

ndsp

ecifi

cin

vest

ible

oppo

rtun

ities

ther

eis

pote

ntia

lfor

coop

erat

ion

betw

een

publ

icpe

nsio

nfu

nds,

stat

eag

enci

es,a

ndlo

calg

over

nmen

tsto

inve

stin

Cal

iforn

iain

frast

ruct

ure.

This

docu

men

tis

anin

itial

atte

mpt

atid

entif

ying

the

curr

ent

chal

leng

esto

inve

stin

gin

Cal

iforn

iain

frast

ruct

ure,

and

aven

ues

for

expl

orin

gpo

ssib

lepa

rtner

ship

betw

een

publ

icpe

nsio

nfu

nds

and

gove

rnm

ent

agen

cies

onin

frast

ruct

ure

inve

stm

ent.

Itis

hope

dth

atth

isov

ervi

eww

illhe

lpim

prov

eth

eef

fect

iven

ess

ofan

ydi

alog

uebe

twee

npu

blic

pens

ion

fund

san

dst

ate

and

loca

lgov

ernm

ents

rega

rdin

gar

easo

fpot

entia

lpar

tner

ship

.


Mek

eta

Inve

stm

ent G

roup

3

Tabl

e of

Con

tent

s

Intr

oduc

tion

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

..1

Infr

astr

uctu

re In

vest

men

t Pro

gram

Hig

hlig

hts.

......

......

......

......

......

......

......

..2

Back

grou

nd: I

nfra

stru

ctur

e In

vest

men

t in

Cal

iforn

ia...

......

......

......

......

......

..3

Cha

lleng

es to

Pen

sion

Fun

d In

vest

men

t in

Publ

ic In

fras

truc

ture

......

......

....4

Priv

ate

Infr

astr

uctu

re In

vest

men

t Opt

ions

......

......

......

......

......

......

......

......

...5

Pote

ntia

l Opp

ortu

nitie

s...

......

......

......

......

......

......

......

......

......

......

......

......

.....

6

Appe

ndic

es

Con

clus

ion

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

....7

Cas

e St

udie

s....

......

......

......

......

......

......

......

......

......

......

......

......

......

......

....8

Refe

renc

es...

......

......

......

......

......

......

......

......

......

......

......

......

......

......

......

.9


Intr

oduc

tion


Mek

eta

Inve

stm

ent G

roup

Intr

oduc

tion

Intr

oduc

tion

Ove

rthe

past

year

,the

two

larg

estp

ublic

pens

ion

fund

sin

Cal

iforn

ia,C

alPE

RSan

dC

alST

RS,

have

eith

eran

noun

ced

new

allo

catio

nsto

infra

stru

ctur

e,or

incr

ease

dex

istin

gon

es.

Toge

ther

,the

sem

ulti-

billi

ondo

llar

com

mitm

ents

toin

frast

ruct

ure

signa

lare

cogn

ition

ofth

est

rate

gic

role

that

infra

stru

ctur

ein

vest

men

tsca

npl

ayin

ape

nsio

npo

rtfol

io.

Thes

eco

mm

itmen

tsto

the

infra

stru

ctur

eas

set

clas

sco

me

ata

time

whe

nC

alifo

rnia

’sfis

cal

chal

leng

esha

vele

ftlo

cal,

regi

onal

,an

dst

ate

agen

cies

with

few

erre

sour

ces

avai

labl

eto

finan

ceth

eon

goin

gm

aint

enan

cean

dop

erat

ion

ofex

istin

gin

frast

ruct

ure

and

the

cons

truct

ion

ofne

wfa

cilit

ies.

Whi

lem

any

publ

icpe

nsio

nfu

nds,

incl

udin

gC

alPE

RS,h

ave

anin

tere

stin

mak

ing

good

inve

stm

ents

inC

alifo

rnia

infra

stru

ctur

e,th

ere

are

still

seve

ralb

arrie

rsto

such

inve

stm

ent.

The

purp

ose

ofth

isdo

cum

enti

sto

prov

ide

anov

ervi

ewof

the

curr

entc

halle

nges

tope

nsio

nfu

ndin

vest

men

tin

Cal

iforn

iain

frast

ruct

ure

with

inth

eco

ntex

tof

inst

itutio

nal

inve

stm

ent

polic

ies

and

stra

tegi

cob

ject

ives

.W

eal

soid

entif

yav

enue

sth

atm

aybe

expl

ored

inor

der

toin

crea

seop

portu

nitie

sfo

rpa

rtner

ship

betw

een

pens

ion

fund

san

dth

epu

blic

sect

or.

The

App

endi

xco

ntai

nsca

sest

udie

sof

rece

nttra

nsac

tions

that

illus

trate

both

som

eof

the

oppo

rtuni

ties

for

infra

stru

ctur

ein

vest

men

tin

Cal

iforn

ia,

asw

ell

asre

leva

ntin

vest

men

tco

nsid

erat

ions

.

5


Infr

astr

uctu

re In

vest

men

t Pr

ogra

m H

ighl

ight

s


Mek

eta

Inve

stm

ent G

roup

Infr

astr

uctu

re In

vest

men

t Pro

gram

Hig

hlig

hts

7

Ther

eis

aw

ide

risk

and

retu

rnsp

ectru

mfo

rin

frast

ruct

ure

inve

stm

ents

,ra

ngin

gfro

mlo

w-r

isk,

low

-vol

atili

tyas

sets

,to

mor

eop

portu

nist

icin

vest

men

tsth

atfa

cegr

eate

rm

arke

t,de

velo

pmen

t,po

litic

al,l

egal

,oro

ther

risks

.

Asth

eyre

late

topo

tent

iali

nves

tmen

tin

Cal

iforn

iain

frast

ruct

ure,

the

key

cons

ider

atio

nsfo

rC

alPE

RSIn

frast

ruct

ure

Prog

ram

incl

ude:

∙Ap

prop

riat

eri

sk/r

etur

n-

The

Cal

PERS

Infra

stru

ctur

ePr

ogra

mta

rget

sde

fens

ive

inve

stm

ents

with

the

follo

win

gch

arac

teris

tics:

–St

able

reve

nues

and

retu

rns;

rate

-reg

ulat

edor

long

-term

cont

ract

ed

–Lo

wde

velo

pmen

tand

oper

atin

gris

k

–C

ash-

gene

rativ

e;ty

pica

llyes

tabl

ished

,ope

ratio

nala

sset

s

–M

inim

aldo

wns

ide

risk

∙Al

ignm

entw

ithSp

onso

rsan

dPa

rtne

rs–

This

incl

udes

appr

opria

teris

ksh

arin

g,st

rong

gove

rnan

ce,f

inan

cial

stre

ngth

,and

shar

edob

ject

ives

.

∙Tr

ansa

ctib

ility

–Es

tabl

ished

and

effic

ient

bidd

ing

and

proc

urem

ent

proc

esse

sw

itha

high

likel

ihoo

dof

trans

actio

nco

mpl

etio

n,ar

ecr

itica

lfor

publ

icpe

nsio

npr

ogra

ms

that

mus

tm

anag

eth

ede

ploy

men

tof

time

and

limite

dre

sour

ces

inth

epu

rsui

tof

inve

stm

ento

ppor

tuni

ties.


Back

grou

nd:

Infr

astr

uctu

re In

vest

men

t in

Cal

iforn

ia


Mek

eta

Inve

stm

ent G

roup

Back

grou

nd:

Infr

astr

uctu

re In

vest

men

t in

Cal

iforn

ia

∙Th

ede

man

dfo

rin

frast

ruct

ure

inve

stm

ent

issig

nific

ant,

yets

tudi

esut

ilize

diffe

rent

defin

ition

sof

infra

stru

ctur

ean

ddi

ffere

ntm

etho

dsfo

rca

lcul

atin

gin

frast

ruct

ure

need

s.

–M

any

defin

ition

sin

clud

epr

ojec

tsw

hich

may

notb

e“i

nves

tible

”(e

.g.,

publ

icho

usin

g)

–Es

timat

esm

ayno

tin

clud

eon

goin

gm

aint

enan

cean

dop

erat

ing

cost

s

–Es

timat

esm

ayno

tta

kein

toac

coun

tbo

thC

alifo

rnia

’sre

cent

unde

rinve

stm

ent

inits

infra

stru

ctur

e,an

dex

pect

edpo

pula

tion

grow

th:

20

10:

37m

illio

n

20

20:

42to

48m

illio

n

9

Sour

ces:

Cal

iforn

ia D

epar

tmen

t of F

inan

ce (2

003)

; Pub

lic P

olic

y In

stitu

te o

f Cal

iforn

ia (2

011)

Esti

mat

ed S

ize

of C

alifo

rnia

Inv

estm

ent

Req

uire

men

t

Cap

ital

Req

uire

d ($

bill

ion)

Pe

riod

(y

ears

) So

urce

424

– 53

0 10

B

ay A

rea

Cou

ncil

Econ

omic

Inst

itute

(201

0)

500

20

Littl

e H

oove

r Com

mis

sion

(201

0)

111.

3 10

C

alifo

rnia

Dep

artm

ent o

f Fin

ance

(200

8)

Infr

astr

uctu

re S

ecto

rs

Tran

spor

tatio

n Ro

ads,

Brid

ges,

Tun

nels,

Mas

s Tr

ansit

,

Park

ing,

Airp

orts

, Sea

ports

, and

Rai

l

Ener

gy

Oil,

Nat

ural

Gas

,

Liqu

id P

ipel

ines

and

Sto

rage

Gas

Dist

ribut

ion

Pow

er

Tran

smiss

ion

Dist

ribut

ion

Gen

erat

ion

(incl

udin

g Re

new

able

s)

Wat

er

Wat

er S

tora

ge, T

rans

porta

tion,

Dist

ribut

ion,

Trea

tmen

t, W

aste

wat

er C

olle

ctio

n, a

nd P

roce

ssin

g

Was

te

Was

te C

olle

ctio

n, T

rans

porta

tion,

Land

fills,

and

Pro

cess

ing

Com

mun

icat

ions

To

wer

s and

Net

wor

ks

Soci

al

Build

ing

Faci

litie

s

(H

ealth

, Edu

catio

n, Ju

stic

e, a

nd M

ilita

ry)

Qua

ntify

ing

the

Cal

iforn

ia In

fras

truc

ture

Gap


Mek

eta

Inve

stm

ent G

roup

Back

grou

nd:

Infr

astr

uctu

re In

vest

men

t in

Cal

iforn

ia

10

Cap

ital S

pend

ing

2009

Stat

e G

O B

onds

16%

Oth

er84

%

Stat

e G

O B

onds

Oth

er

Stat

e G

O B

onds

57%

Oth

er43

%

Stat

e G

O B

onds

Oth

er

Sour

ce: L

ittle

Hoo

ver C

omm

issio

n (2

010)

; Pub

lic P

olic

y In

stitu

te o

f Cal

iforn

ia (2

009)

Cap

ital S

pend

ing

1978

Cal

iforn

iare

lies

onnu

mer

ous

publ

icso

urce

sto

finan

ceits

infra

stru

ctur

e,pr

imar

ilybo

nds

(Gen

eral

Obl

igat

ion

(“G

O”)

and

Reve

nue

Bond

s).

Itis

estim

ated

that

the

stat

e’s

relia

nce

onbo

nds

for

capi

tal

spen

ding

has

incr

ease

dsig

nific

antly

over

the

past

30ye

ars.

Exam

ple:

GO

Bond

Issu

ance


Mek

eta

Inve

stm

ent G

roup

Back

grou

nd:

Infr

astr

uctu

re In

vest

men

t in

Cal

iforn

ia

Oth

erpu

blic

sour

ces

used

tofin

ance

infr

astr

uctu

rein

Cal

iforn

iain

clud

e:

∙St

ate

Gen

eral

Fund

∙Sp

ecia

lFun

ds(m

ainl

yfo

rtra

nspo

rtatio

n)

∙Fe

dera

lHig

hway

Trus

tFun

d

∙D

evel

opm

entI

mpa

ctFe

es

∙G

asol

ine

Tax

Use

rfe

e-ba

sed

finan

ce

∙To

lling

hasb

een

used

ona

limite

dnu

mbe

rofr

oads

–SR

91Ex

pres

s

–SR

125

–SR

241

–I-1

5Ex

pres

s

∙M

ostu

tiliti

esch

arge

user

fees

–El

ectri

city

and

Gas

–W

ater

–W

aste

11


Mek

eta

Inve

stm

ent G

roup

Back

grou

nd:

Infr

astr

uctu

re In

vest

men

t in

Cal

iforn

ia

Bond

ing

has

been

the

pref

erre

dm

echa

nism

for

finan

cing

infr

astr

uctu

re,

for

seve

ral

reas

ons

12

Sour

ce:

Publ

ic P

olic

y In

stitu

te o

f Cal

iforn

ia

Bene

fits

of th

e U

se o

f Bon

d Fi

nanc

ing

for

Infr

astr

uctu

re

Com

men

t

App

rova

l Pro

cess

St

ate

GO

Bo

nds

requ

ire

only

a

maj

ority

ap

prov

al

by

vote

rs

(Bon

ds is

sued

by

loca

l aut

horit

ies

requ

ire s

uper

maj

ority

).

Suita

bilit

y fo

r Lar

ge C

apita

l Pro

ject

s Lo

ng-t

erm

bo

rrow

ing

enab

les

publ

ic

agen

cies

to

fin

ance

la

rge

capi

tal p

roje

cts

that

wou

ld n

ot b

e po

ssib

le to

pay

for u

p fro

nt.

And

, sin

ce

infra

stru

ctur

e pr

ojec

ts

are

desig

ned

to

serv

e m

ultip

le

gene

ratio

ns, i

t mak

es s

ense

that

the

debt

obl

igat

ions

are

pai

d do

wn

over

long

er p

erio

ds.

Tax

Adv

anta

ge

Due

to

th

eir

tax-

exem

pt

stat

us,

bond

s m

ay

be

econ

omic

ally

ad

vant

ageo

us c

ompa

red

to ta

xabl

e fu

ndin

g so

urce

s.

Suita

bilit

y fo

r Pro

ject

s w

ithou

t Rev

enue

s Si

nce

inte

rest

an

d pr

inci

pal

are

paid

fro

m

the

Gen

eral

Fu

nd,

GO

Bon

ds

may

be

us

ed

to

fund

pr

ojec

ts

that

do

no

t ha

ve

a de

dica

ted

reve

nue

stre

am.


Mek

eta

Inve

stm

ent G

roup

Back

grou

nd:

Infr

astr

uctu

re In

vest

men

t in

Cal

iforn

ia

Des

pite

the

bene

fits

ofbo

nds,

the

use

ofbo

rrow

ing

tofin

ance

infr

astr

uctu

real

soha

slim

itatio

ns

13

Lim

itatio

ns o

n th

e U

se o

f Bon

d Fi

nanc

ing

for

Infr

astr

uctu

re

Com

men

t

Deb

t Bur

den

GO

bon

d iss

uanc

e ha

s in

crea

sed

debt

ser

vice

pai

d by

the

Gen

eral

Fun

d, a

t a ti

me

whe

n st

ate

reve

nue

colle

ctio

ns h

ave

been

im

pact

ed b

y th

e re

cess

ion

and

hous

ing

mar

ket

colla

pse.

Bo

rrow

ing

for

infra

stru

ctur

e ha

s al

so i

mpa

cted

Cal

iforn

ia’s

cre

dit

ratin

g, a

nd

limits

fut

ure

use

of G

ener

al F

und

reso

urce

s.

And

, th

e de

bt s

ervi

ce o

blig

atio

ns o

f th

e G

ener

al F

und

are

typi

cally

dec

oupl

ed fr

om th

e co

st o

f del

iver

y of

the

serv

ice.

Rest

rictio

ns

Mos

t ta

x-ex

empt

bon

ds i

mpo

se r

estr

ictio

ns o

n th

e pa

rtici

patio

n of

non

-gov

ernm

ent

parti

es (“

bad

use”

).

Lim

ited

Use

of P

roce

eds

Tax

exem

ptio

ns a

dd t

o th

e af

ford

abili

ty o

f bo

ndin

g, y

et b

onds

typ

ical

ly d

o no

t in

clud

e th

e co

sts

of o

ngoi

ng m

aint

enan

ce a

nd u

pkee

p, w

hich

, ov

er t

he li

fe o

f th

e as

set,

ofte

n ex

ceed

up

front

con

stru

ctio

n co

sts.

Th

e C

alifo

rnia

Dep

artm

ent

of T

rans

porta

tion

estim

ates

$6

billi

on in

ann

ual m

aint

enan

ce c

osts

for t

he s

tate

’s h

ighw

ay s

yste

m, d

espi

te a

bu

dget

of $

1.5

billi

on.

Tax

Disa

dvan

tage

Ta

x ex

empt

ions

may

lim

it th

e co

mpe

titiv

enes

s of

the

priv

ate

sect

or.

The

Nat

iona

l Re

sear

ch C

ounc

il es

timat

ed a

n ef

fect

ive

inte

rest

rat

e pr

emiu

m o

f 20

to

40 p

erce

nt

rela

tive

to p

ublic

ly d

ebt.

Ade

quac

y of

Rev

enue

Str

eam

s Fo

r re

venu

e bo

nds,

the

sou

rce

of r

even

ues

agai

nst

whi

ch c

laim

s ar

e m

ade

may

, ov

er

time,

ei

ther

be

in

suffi

cien

t to

co

ver

cost

s or

ta

ke

away

fro

m

othe

r us

es

(e.g

., m

aint

enan

ce).

So

urce

: Litt

le H

oove

r Com

miss

ion

(201

0); K

esto

n In

stitu

te (2

006)


Cha

lleng

es to

Pen

sion

Fun

d In

vest

men

t in

Pub

lic In

fras

truc

ture


Mek

eta

Inve

stm

ent G

roup

Cha

lleng

es to

Pen

sion

Fun

d In

vest

men

t in

Pub

lic In

fras

truc

ture

Whi

leC

alifo

rnia

isin

need

ofal

tern

ativ

eso

urce

sof

finan

cing

tom

eet

itspu

blic

infra

stru

ctur

ene

eds,

curr

ently

ther

ear

enu

mer

ous

chal

leng

esto

priv

ate

inst

itutio

nal

inve

stm

ent.

InC

alifo

rnia

,an

din

othe

rst

ates

,the

maj

ority

ofin

frast

ruct

ure

asse

tsar

epu

blic

lyow

ned,

oper

ated

,and

/or

mai

ntai

ned,

whi

chm

aylim

itth

esu

itabi

lity

ofth

ird-p

arty

inst

itutio

nali

nves

tmen

t.

Key

Cha

lleng

es:

1.Re

stric

tions

onpu

blic

finan

cing

sour

ces

2.La

ckof

dedi

cate

dre

venu

est

ream

s

3.U

ncer

tain

tyar

ound

the

publ

icpr

ocur

emen

tpro

cess

4.O

ther

cons

ider

atio

ns

15

Sect

ors

Ow

ners

hip

Port

s Pu

blic

ly o

wne

d an

d op

erat

ed

Airp

orts

Pu

blic

ly o

wne

d an

d op

erat

ed

Road

s Pu

blic

ly o

wne

d

Priv

ate:

A

B 68

0 (1

989)

, per

mitt

ing

up to

4 p

rivat

e to

ll ro

ad p

roje

cts

SB X

2 4

(200

9), p

erm

ittin

g an

unl

imite

d nu

mbe

r of P

PPs

thro

ugh

2017

Ener

gy

Publ

icly

Ow

ned

Util

ities

In

vest

or O

wne

d U

tiliti

es (R

egul

ated

)

Wat

er

Publ

icly

Ow

ned

Util

ities

In

vest

or O

wne

d U

tiliti

es (R

egul

ated

)


Mek

eta

Inve

stm

ent G

roup

Cha

lleng

es to

Pen

sion

Fun

d In

vest

men

t in

Pub

lic In

fras

truc

ture

1.Fi

nanc

ing

sour

ces

may

impo

sere

stric

tions

onin

vest

men

t–

Asno

ted

inth

epr

evio

usse

ctio

n,pu

blic

finan

cing

sour

ces,

such

asta

x-ex

empt

bond

san

dfe

dera

lgra

nts,

have

rest

ricte

dth

eus

eof

third

-par

tyin

vest

men

t.

∙Ex

ampl

e:A

irpor

ts-

As

publ

icly

-ow

ned

asse

ts,

airp

orts

utili

zedi

ffere

ntso

urce

sfo

rfin

anci

ngop

erat

ions

,m

aint

enan

ce,a

ndim

prov

emen

ts

–Ta

x-Ex

empt

Bond

s

–A

irpor

tIm

prov

emen

tPro

gram

(“A

IP”)

Fund

s–

Fede

ralG

rant

s

–Pa

ssen

gerF

acili

tyC

harg

es(“

PFC

”)

–A

irlin

ein

vest

men

t

∙A

cces

sto

certa

inso

urce

sof

fund

ing

crea

tes

rest

rictio

nson

priv

ate

inve

stm

ent

–Ta

x-Ex

empt

Bond

s:A

“Bad

Use

”pr

ovisi

onap

plie

sto

tax-

exem

ptbo

nds.

–A

irpor

tIm

prov

emen

tPr

ogra

m:

Acc

ordi

ngto

the

Reas

onFo

unda

tion,

“The

Fede

ral

Airp

ort

Impr

ovem

ent

Prog

ram

impo

ses

econ

omic

regu

latio

non

U.S

.ai

rpor

tsin

exch

ange

for

annu

algr

ant

fund

ing.

Thos

ere

gula

tions

prec

lude

airp

ortp

rivat

izat

ion,

beca

use

they

requ

ireal

l“ai

rpor

trev

enue

s”-

incl

udin

gpr

ocee

dsfro

ma

leas

eor

sale

-to

bere

inve

sted

inth

eai

rpor

t(o

rai

rpor

tsy

stem

)th

atge

nera

tes

them

.Th

atm

eans

aci

ty,

coun

tyor

stat

eth

atw

ishes

tole

ase

orse

llits

airp

ort

wou

ldre

ceiv

eze

rofin

anci

albe

nefit

sfro

mso

doin

g.Th

ere

gula

tions

also

proh

ibit

any

airp

ort

oper

ator

(incl

udin

gan

inve

stor

-ow

ned

airp

ort

com

pany

)fro

mta

king

any

prof

itsof

fthe

airp

ort,

whi

chm

eans

such

aco

mpa

nyw

ould

have

noin

cent

ive

toac

quire

aU

.S.a

irpor

t.”

16

Sour

ce:

Jaco

bs C

onsu

ltanc

y (2

007)

; Rea

son

Foun

datio

n (2

011)


Mek

eta

Inve

stm

ent G

roup

Cha

lleng

es to

Pen

sion

Fun

d In

vest

men

t in

Pub

lic In

fras

truc

ture

The

Fede

ralA

viat

ion

Adm

inist

ratio

n(“

FAA”

)Rea

utho

rizat

ion

Act

(199

6)cr

eate

dth

eAi

rpor

tPr

ivat

izat

ion

Pilo

tPr

ogra

m,

whi

chau

thor

izes

the

use

ofPu

blic

Priv

ate

Partn

ersh

ips

for

upto

five

airp

orts

.Ke

yco

nditi

onso

fthe

prog

ram

incl

ude:

∙A

“rat

eof

retu

rn”

tobe

asse

ssed

asan

ince

ntiv

efo

rpriv

ate

inve

stor

s

∙Ap

prov

alby

the

FAA

and

65%

ofai

rline

sse

rvic

ing

the

airp

ortr

equi

red

forp

rivat

izat

ion

Des

pite

auth

oriz

atio

n,no

U.S

.airp

orts

have

been

priv

atiz

edun

dert

hePi

lotP

rogr

am

∙In

2009

,the

City

ofC

hica

gofa

iled

topr

ivat

ize

Mid

way

Airp

ort

∙In

2010

,an

appl

icat

ion

topr

ivat

ize

Luis

Mun

ozM

arin

Inte

rnat

iona

lAirp

ort

(San

Juan

,Pu

erto

Rico

)re

ceiv

edpr

elim

inar

yFA

Aap

prov

al;

this

may

beth

efir

stai

rpor

tto

bepr

ivat

ized

unde

rth

ePi

lot

Prog

ram

17


Mek

eta

Inve

stm

ent G

roup

Cha

lleng

es to

Pen

sion

Fun

d In

vest

men

t in

Pub

lic In

fras

truc

ture

2.M

any

infra

stru

ctur

ese

ctor

sla

ckde

dica

ted

sour

ces

ofre

venu

e–

Typi

cally

,in

frast

ruct

ure

faci

litie

sla

ckin

ga

dedi

cate

dre

venu

est

ream

(e.g

.,us

erfe

es)t

opa

ya

retu

rnto

inve

stor

sw

ould

notb

esu

itabl

efo

rpr

ivat

ein

vest

men

t,su

chas

K-12

scho

ols,

priso

ns,

polic

est

atio

ns,

and

freew

ays.

Ince

rtain

case

s,pu

blic

agen

cies

have

reco

gniz

edth

eco

stof

cons

truct

ing,

oper

atin

g,an

dm

aint

aini

ngin

frast

ruct

ure

asse

ts,

and

have

iden

tifie

dpu

blic

orpr

ivat

efin

anci

ngso

urce

sto

supp

ort

the

life-

cycl

eco

sts

ofan

infra

stru

ctur

epr

ojec

t.

18

Sour

ce

Com

men

t Ex

ampl

e

Toll

Cal

iforn

ia b

egan

util

izin

g to

lls i

n 19

89,

with

the

pas

sage

of

Ass

embl

y Bi

ll 68

0 (“

AB

680”

), w

hich

gra

nted

the

Cal

iforn

ia

Dep

artm

ent

of T

rans

port

atio

n (“

Cal

Tran

s”)

legi

slativ

e au

thor

ity

to c

ontra

ct w

ith t

he p

rivat

e se

ctor

to

deve

lop,

bui

ld,

oper

ate,

an

d m

aint

ain

up t

o fo

ur r

oads

. T

wo

tolle

d fa

cilit

ies

wer

e au

thor

ized

und

er A

B 68

0.

SR 9

1 Ex

pres

s La

nes

(199

5)

SR 1

25 T

oll R

oad

(200

3)

Ava

ilabi

lity

Paym

ent

App

ropr

iatio

ns o

f pu

blic

fun

ds t

o pa

y th

e pr

ivat

e se

ctor

in

exch

ange

fo

r m

akin

g an

as

set

“ava

ilabl

e”

to

the

publ

ic

(“A

vaila

bilit

y Pa

ymen

ts”)

.

In

cont

rast

to

to

lls,

avai

labi

lity

paym

ents

do

no

t re

pres

ent

a ne

w

sour

ce

of

fund

ing

for

infra

stru

ctur

e, b

ut r

athe

r ar

e a

mea

ns f

or t

he p

ublic

sec

tor

to

pay

the

priv

ate

sect

or fo

r the

cos

t of d

evel

opm

ent,

cons

truct

ion,

op

erat

ions

, and

mai

nten

ance

of a

n as

set o

ver a

long

per

iod.

Long

Bea

ch C

ourt

hous

e Re

deve

lopm

ent P

roje

ct (2

010)

-

(Aut

horiz

ed u

nder

Sen

ate

Bill

77)

Pres

idio

Par

kway

(201

0) -

(Aut

horiz

ed u

nder

Sen

ate

Bill

2X 4

)


Mek

eta

Inve

stm

ent G

roup

Cha

lleng

es to

Pen

sion

Fun

d In

vest

men

t in

Pub

lic In

fras

truc

ture

Des

pite

early

atte

mpt

sati

nfra

stru

ctur

epr

ivat

izat

ion

inC

alifo

rnia

,the

track

reco

rdha

sbe

enlim

ited.

∙Ev

enif

ther

eis

apo

ssib

ility

ofcr

eatin

ga

reve

nue

stre

amto

pay

for

the

deve

lopm

ent,

mai

nten

ance

,an

dop

erat

ion

ofan

infra

stru

ctur

eas

set,

such

asus

erfe

es,p

oliti

calw

illis

requ

ired

todo

so.

∙W

ithfe

wex

cept

ions

,leg

islat

ive

initi

ativ

esha

vebe

enfo

cuse

dpr

imar

ilyon

road

trans

port.

∙To

lling

arra

ngem

ents

,whi

chw

ere

used

inea

rlier

road

proj

ects

,req

uire

dpr

ivat

ein

vest

ors

toas

sum

etra

ffic

risk.

The

bank

rupt

cyof

SR12

5is

one

exam

ple

ofth

eris

ksas

soci

ated

with

traffi

cvo

lum

es.

∙Av

aila

bilit

ypa

ymen

tstru

ctur

esin

sula

tein

vest

ors

from

traffi

cris

k,ye

tthe

yty

pica

llyre

quire

the

annu

alap

prop

riatio

nof

publ

icfu

nds

byst

ate

agen

cies

.Th

eap

prop

riatio

nof

publ

icfu

nds

topa

ypr

ivat

ede

velo

pers

and

oper

ator

sfo

rmul

tiple

deca

des

isst

illre

lativ

ely

unco

mm

onin

the

U.S

.

∙Pr

actic

ally

all

proj

ects

appr

oved

unde

rva

rious

Cal

iforn

iale

gisla

tion

toen

able

PPPs

are

gree

nfie

ldpr

ojec

ts,

requ

iring

inve

stor

sto

assu

me

deve

lopm

ent

and

cons

truct

ion

risk,

and

are

not

cash

gene

rativ

eun

tilre

achi

ngan

oper

atio

nals

tage

.

19


Mek

eta

Inve

stm

ent G

roup

Cha

lleng

es to

Pen

sion

Fun

d In

vest

men

t in

Pub

lic In

fras

truc

ture

3.U

ncer

tain

tyar

ound

the

proc

urem

ent

proc

ess

–To

enga

gew

ithth

epr

ivat

ese

ctor

,th

epu

blic

sect

orm

ust

man

age

atra

nspa

rent

,effi

cien

t,an

dco

nsist

ent

proc

ess

for

offe

ring

cont

ract

sor

conc

essio

ns.

Inot

her

coun

tries

with

succ

essf

ulPP

Ppr

ogra

ms,

cent

ers

ofex

celle

nce

have

been

esta

blish

edto

prov

ide

info

rmat

ion,

guid

elin

es,a

ndad

viso

rysu

ppor

ton

PPPs

topu

blic

and

priv

ate

sect

ors.

InC

alifo

rnia

,the

Publ

icIn

frast

ruct

ure

Advi

sory

Com

miss

ion

(“PI

AC”)

,au

thor

ized

bySe

nate

Bill

X24,

was

crea

ted

toas

sists

tate

and

loca

ltra

nspo

rtatio

nag

enci

esin

the

eval

uatio

nof

PPPs

.To

date

,PIA

C’s

man

date

isst

illlim

ited

and

publ

ic-s

ecto

rpr

oces

ses

gene

rally

have

notf

ollo

wed

ast

anda

rdiz

edpr

oces

s.

∙M

any

proj

ects

had

very

long

deve

lopm

entt

imes

–Pl

ans

tom

ake

impr

ovem

ents

toD

oyle

Driv

ebe

gan

inth

e19

70s;

the

Envi

ronm

enta

lAss

essm

entw

asin

itiat

edin

2000

and

certi

fied

in20

08.T

hepr

ojec

trea

ched

finan

cial

clos

ein

2010

.

–Th

ene

wse

gmen

tof

SR12

5w

asad

opte

dby

Cal

trans

in20

00,a

ndth

efin

alen

viro

nmen

talp

erm

itsw

ere

rece

ived

in20

01.T

hero

adop

ened

in20

07.

∙O

ther

publ

icpr

oces

ses

faile

dto

adva

nce

beyo

ndin

itial

RFIs

tage

–In

Nov

embe

r20

08,

the

City

ofLo

sA

ngel

esbe

gan

disc

ussio

nson

priv

atiz

ing

park

ing

gara

ges,

follo

win

gth

epr

ivat

izat

ion

ofpa

rkin

gm

eter

sby

the

City

ofC

hica

go.

The

City

ofLo

sA

ngel

esiss

ued

anRF

Qin

Febr

uary

2010

for

apo

ssib

leco

nces

sion

ofpu

blic

ly-o

wne

dpa

rkin

gga

rage

s.Th

eci

tyan

ticip

ated

shor

t-lis

ting

bidd

ers

inm

id-M

arch

2010

,rel

easin

gth

ebi

ddo

cum

ents

inM

ay20

10an

dcl

osin

gth

eco

nces

sion

inJu

ly20

10.N

ofu

rther

step

sha

vebe

enta

ken.

–Lo

sA

ngel

esW

orld

Airp

orts

(“LA

WA

”)so

licite

dEx

pres

sions

ofIn

tere

stfo

ra

long

-ter

mco

nces

sion

tom

anag

ean

dop

erat

eO

ntar

ioA

irpor

t,w

itha

due

date

ofFe

brua

ry28

,201

1.N

ofu

rthe

rst

eps

have

been

anno

unce

d.

20


Mek

eta

Inve

stm

ent G

roup

Cha

lleng

es to

Pen

sion

Fun

d In

vest

men

t in

Pub

lic In

fras

truc

ture

4.O

ther

cons

ider

atio

ns

∙D

ecisi

onm

akin

gin

Cal

iforn

iais

dece

ntra

lized

.Th

ere

isno

cent

raliz

ed,s

yste

mat

icfra

mew

ork

for

stat

e,re

gion

al,

orlo

cal

agen

cies

,le

gisla

tive

bodi

es,

orot

her

auth

oriti

esto

offe

rlo

ng-t

erm

oper

atin

gco

nces

sions

and

cont

ract

sw

ithpr

ivat

epa

rties

tom

anag

ean

dop

erat

epu

blic

infra

stru

ctur

e.

∙M

ostr

ecen

tPPP

sha

vesig

nific

antc

onst

ruct

ion

com

pone

nts.

Gre

enfie

ldpr

ojec

tsar

ene

cess

ary,

yet

they

expo

sein

vest

ors

tode

velo

pmen

trisk

,and

they

are

nots

truct

ured

topr

ovid

eca

shyi

eld

until

the

proj

ects

are

inop

erat

ion.

∙G

reen

field

PPP

stru

ctur

esty

pica

llyco

nsist

mor

eof

debt

that

equi

ty;

min

imal

equi

tyre

quire

men

tsm

ayno

tbe

suita

ble

forl

arge

rinv

estm

entp

rogr

ams.

21

Pres

idio

Par

kway

C

apita

l Str

uctu

re

($ m

illio

ns)

Lo

ng B

each

Cou

rtho

use

Cap

ital S

truc

ture

($

mill

ions

)

Equi

ty

45

Eq

uity

49

Priv

ate

Act

ivity

Bon

ds

150

Ba

nk D

ebt

442

TIFI

A 15

0


Priv

ate

Infr

astr

uctu

re

Inve

stm

ent O

ptio

ns


Mek

eta

Inve

stm

ent G

roup

Priv

ate

Infr

astr

uctu

re In

vest

men

t Opt

ions

Man

yof

the

curr

entc

halle

nges

toin

vest

men

tin

publ

icin

frast

ruct

ure

dono

tapp

lyto

infra

stru

ctur

eas

sets

inpr

ivat

eow

ners

hip.

InC

alifo

rnia

,priv

atel

yow

ned

and

oper

ated

infra

stru

ctur

eco

nsist

spr

imar

ilyof

asse

tsin

the

ener

gy,

wat

er,

and

com

mun

icat

ions

sect

ors.

Asw

ithpu

blic

infra

stru

ctur

e,pr

ivat

ein

frast

ruct

ure

asse

tspr

ovid

ees

sent

ials

ervi

ces

toco

mm

uniti

esan

dbu

sines

ses.

23

Sect

ors

Ow

ners

hip

Elec

tric

Util

ities

Pu

blic

: M

unic

ipal

Ow

ned

Util

ities

Pr

ivat

e:

Inve

stor

Ow

ned

Util

ities

(Reg

ulat

ed)

Gen

erat

ion

Priv

ate

Tran

smiss

ion

Priv

ate

Wat

er U

tiliti

es

Publ

ic:

Mun

icip

al O

wne

d U

tiliti

es

Priv

ate:

In

vest

or O

wne

d U

tiliti

es (R

egul

ated

)

Com

mun

icat

ions

Pr

ivat

e


Mek

eta

Inve

stm

ent G

roup

Priv

ate

Infr

astr

uctu

re In

vest

men

t Opt

ions

Ther

ear

ese

vera

lkey

diffe

renc

esbe

twee

npu

blic

and

priv

atel

yow

ned

infra

stru

ctur

e

24

Area

s Pu

blic

Pr

ivat

e

Proc

urem

ent

Pu

blic

pro

cess

Pr

ivat

e pr

oces

s

Reve

nue

Sour

ces

Tolli

ng, u

tiliz

atio

n-ba

sed,

ava

ilabi

lity

Regu

late

d; lo

ng-t

erm

con

tract

s

Dev

elop

men

t PP

Ps in

trod

uce

deve

lopm

ent a

nd c

onst

ruct

ion

risk

Priv

ate

infra

stru

ctur

e m

ay

cons

ist

of

brow

nfie

ld a

sset

s or

new

dev

elop

men

t

Fina

ncin

g

Ofte

n ut

ilize

pub

lic-s

ecto

r fin

anci

ng

Use

of p

rivat

e ca

pita

l

Equi

ty R

equi

rem

ents

Li

mite

d eq

uity

requ

irem

ents

for m

any

PPPs

D

eal

sizes

va

ry

but

ofte

n re

quire

su

bsta

ntia

l equ

ity

Ther

e ar

e ty

pica

lly m

ore

brow

nfie

ld o

ppor

tuni

ties

in th

e pr

ivat

e in

frast

ruct

ure

spac

eEx

ampl

e: C

alifo

rnia

ele

ctric

dist

ribut

ion

and

gene

ratio

n as

set s

ale

(201

1)

∙Se

ller:

NV

Ener

gy

∙Bu

yer:

Libe

rty

Ener

gy-C

alifo

rnia

Paci

ficEl

ectri

cC

ompa

ny

∙Pr

oces

s:C

omm

erci

al

∙Ra

tiona

le:

NV

Ener

gysa

idit

was

selli

ngits

Cal

iforn

iaas

sets

inor

der

toco

ncen

trat

eon

itsbu

sines

sin

the

Stat

eof

Nev

ada,

whe

reit

serv

esap

prox

imat

ely

97pe

rcen

tofa

llel

ectri

ccu

stom

ersi

nth

est

ate.


Mek

eta

Inve

stm

ent G

roup

Priv

ate

Infr

astr

uctu

re In

vest

men

t Opt

ions

Stat

ein

itiat

ives

have

crea

ted

oppo

rtuni

ties

forp

rivat

ein

frast

ruct

ure

inve

stm

enti

nC

alifo

rnia

.

Rene

wab

lePo

rtfol

ioSt

anda

rd(“

RPS”

)-C

alifo

rnia

has

one

ofth

em

osta

mbi

tious

RPS

inth

eco

untry

.Sta

teut

ilitie

sar

ere

quire

dto

proc

ure

elec

trici

tyfro

map

prov

edre

new

able

sour

ces.

Inco

ntra

stto

publ

icin

frast

ruct

ure

sect

ors,

inve

stor

sen

ter

into

long

-term

Pow

erPu

rcha

seA

gree

men

ts(“

PPA

s”)

with

elec

tric

utili

ties,

whi

chty

pica

llypr

ovid

ea

fixed

pric

efo

rth

ege

nera

tion

and

trans

miss

ion

ofre

new

able

ener

gy.

25

Dea

dlin

e

Elec

tric

ity fr

om

Rene

wab

le S

ourc

es

(%)

Util

ity

Cur

rent

Use

of

Rene

wab

les

(%

)

2013

20

Paci

fic G

as &

Ele

ctric

17

.7

2016

25

Sout

hern

Cal

iforn

ia E

diso

n 19

.4

2020

33

San

Die

go G

as &

Ele

ctric

11

.9


Mek

eta

Inve

stm

ent G

roup

Priv

ate

Infr

astr

uctu

re In

vest

men

t Opt

ions

Des

pite

seve

ral

inve

stor

-frie

ndly

feat

ures

ofth

eRP

Spr

ogra

m,

ther

ear

est

illch

alle

nges

toin

vest

men

tin

Cal

iforn

ia.

26

Cha

lleng

es

Com

men

t

Cal

iforn

ia E

nviro

nmen

tal Q

ualit

y Ac

t (“C

EQA

”)

CEQ

A is

a s

tate

law

requ

iring

sta

te a

nd lo

cal a

genc

ies

to id

entif

y an

d re

duce

, if

feas

ible

, the

sig

nific

ant,

nega

tive

envi

ronm

enta

l im

pact

s of

land

use

dec

ision

s.

Inab

ility

to re

ceiv

e C

EQA

app

rova

ls ha

s le

d to

the

dela

y of

man

y in

frast

ruct

ure

proj

ects

. I

n pa

rticu

lar,

an E

nviro

nmen

tal

Impa

ct R

epor

t (E

IR)

from

CEQ

A re

quire

s th

at a

ll sig

nific

ant

impa

cts

be m

itiga

ted

or o

ver-

ridde

n.

It ha

s be

en

reco

mm

ende

d th

at

an

exce

ptio

ns

proc

ess

is cr

eate

d to

en

able

en

ergy

in

vest

men

t. T

here

hav

e al

so b

een

char

ges

that

cer

tain

int

eres

t gr

oups

hav

e ex

erte

d in

fluen

ce o

ver t

he a

ppro

vals

proc

ess.

Dev

elop

men

t Risk

s In

add

ition

to h

urdl

es re

late

d to

CEQ

A, C

alifo

rnia

has

oth

er e

nviro

nmen

tal a

nd

deve

lopm

ent c

halle

nges

.

Cal

iforn

ia I

ndep

ende

nt S

yste

m O

pera

tor

(“IS

O”)

– C

alifo

rnia

ISO

req

uire

s sp

onso

rs to

mak

e up

fron

t fin

anci

al c

omm

itmen

ts in

ord

er to

rese

rve

a sp

ace

in

the

inte

rcon

nect

ion

queu

e. A

s a

resu

lt, m

any

proj

ects

hav

e be

en su

spen

ded

or

term

inat

ed d

ue to

up

front

cos

t req

uire

men

ts a

nd d

elay

s.

Pow

er P

urch

ase

Agr

eem

ent (

"PPA

") N

egot

iatio

n -

Exec

uted

PPA

s ar

e ne

cess

ary

to o

btai

n ap

prov

al a

nd fi

nanc

ing

for

ener

gy p

roje

cts.

How

ever

, the

pro

cess

of

nego

tiatin

g PP

As

has

been

impa

cted

by

ongo

ing

regu

lato

ry a

nd p

olic

y ch

ange

s,

whi

ch h

as m

ade

it di

fficu

lt fo

r dev

elop

ers t

o pl

an a

nd b

udge

t pro

ject

s.

Sour

ce:

Man

att,

Phel

ps, &

Phi

llips

(201

1)


Mek

eta

Inve

stm

ent G

roup

Priv

ate

Infr

astr

uctu

re In

vest

men

t Opt

ions

Rest

rictio

nson

the

deve

lopm

ent

ofel

ectri

cge

nera

tion

and

trans

miss

ion

inC

alifo

rnia

have

cont

ribut

edto

the

term

inat

ion

ofa

num

ber

ofpr

ojec

ts,o

rpr

ojec

tsbe

ing

deve

lope

dou

tof

stat

eto

mee

tCal

iforn

ia’s

RPS.

27

Sour

ce:

Cal

iforn

ia D

epar

tmen

t of E

nerg

y (2

011)

Stat

us o

f RPS

PPA

s (2

002-

2011

) N

umbe

r

of P

roje

cts

Reje

cted

/can

celle

d 40

Ope

ratio

nal

93

In P

rogr

ess

135

Tota

l Pro

ject

s 26

8

Tota

l Ter

min

ated

14

.9%

Year

PP

As

(#)

In S

tate

(%

)

2002

13

10

0

2003

7

100

2004

3

100

2005

12

10

0

2006

6

100

2007

15

93

2008

30

80

2009

37

46

2010

62

81

2011

43

86


Pote

ntia

l Opp

ortu

nitie

s


Mek

eta

Inve

stm

ent G

roup

Pote

ntia

l Opp

ortu

nitie

s

We

expe

ctth

atpu

blic

pens

ion

fund

sw

illha

veam

ple

oppo

rtuni

tyto

inve

stin

priv

ate

infra

stru

ctur

ew

ithin

Cal

iforn

ia,a

ndw

illdo

sosu

cces

sful

ly.

We

expe

ctth

atit

will

bem

ore

chal

leng

ing

forp

ublic

pens

ion

fund

sto

inve

stin

infra

stru

ctur

eth

atis

curr

ently

inpu

blic

sect

orha

nds.

Des

pite

chal

leng

es,

we

belie

vepo

tent

ial

oppo

rtuni

ties

may

bege

nera

ted

thro

ugh

cons

ider

atio

nan

dex

plor

atio

nof

the

follo

win

g:

Stat

eag

ency

stat

us–

Publ

icpe

nsio

nfu

nds

are

clas

sifie

das

stat

eag

enci

es,

whi

chm

aypr

ovid

eth

emw

ithop

portu

nitie

sto

partn

erw

ithth

epu

blic

sect

oron

infra

stru

ctur

ein

vest

men

twith

outi

mpa

ctin

gth

eus

eof

publ

icfin

anci

ngso

urce

s.Th

epo

tent

iala

dvan

tage

sof

fere

dby

stat

eag

ency

stat

ussh

ould

beex

plor

edfu

rther

.

Mun

icip

alho

me

rule

–C

alifo

rnia

ison

eof

12st

ates

with

“Bro

adH

ome

Rule

.”H

ome

rule

mun

icip

aliti

esha

vegr

eate

rle

gala

utho

rity

toco

nduc

tth

eir

own

affa

irsw

ithou

tin

terfe

renc

efro

mst

ate

legi

slatu

res,

incl

udin

gth

ene

gotia

tion

ofPP

Ps.H

ome

rule

coul

den

able

bi-la

tera

lne

gotia

tion

betw

een

publ

icpe

nsio

nfu

nds

and

loca

lst

ate

agen

cies

rega

rdin

gpo

tent

ial

infra

stru

ctur

ein

vest

men

t.

Brow

nfie

ldan

dse

cond

ary

oppo

rtun

ities

–A

lthou

ghst

ate

PPP

prog

ram

sha

veta

rget

edgr

eenf

ield

proj

ects

,th

ere

may

beop

portu

nitie

sfo

rth

esa

leof

oper

atio

nal

publ

icin

frast

ruct

ure

asse

tsto

publ

icpe

nsio

nfu

nds.

And,

over

the

long

erte

rm,w

eex

pect

tose

ea

mar

keto

fope

ratio

nalP

PPpr

ojec

tsth

atm

ight

besu

itabl

efo

rpen

sion

fund

inve

stm

ent.

29


Mek

eta

Inve

stm

ent G

roup

Pote

ntia

l Opp

ortu

nitie

s

Prog

ram

sfro

mot

her

coun

tries

offe

rex

ampl

esof

stat

esu

ppor

tfo

rpr

ivat

ein

frast

ruct

ure

inve

stm

ent,

asw

ella

siss

ues

raise

dby

enga

gem

entw

ithpr

ivat

ein

vest

ors.

Que

ensl

and

Asse

t Sal

e Pr

ogra

m

In20

10,

aspa

rtof

abr

oade

rde

ficit

redu

ctio

npr

ogra

m,

the

gove

rnm

ent

ofQ

ueen

sland

,A

ustra

lia,s

old

five

stat

e-ow

ned

asse

tsut

ilizi

ngse

vera

ldiff

eren

tpro

cess

es.

Opp

ortu

nity

:Th

eas

sets

ales

raise

dap

prox

imat

ely

A$12

billi

on.

Con

side

ratio

ns:

The

sale

ofQ

ueen

sland

Mot

orw

ays

was

exec

uted

thro

ugh

the

off-m

arke

ttra

nsfe

rto

Que

ensla

ndIn

vest

men

tCor

pora

tion

(“Q

IC”)

,the

stat

epe

nsio

nfu

nd.

30

Asse

t Pr

ocee

ds

(A$

billi

on)

Mod

e of

Sal

e

Port

of B

risba

ne

2.3

99-y

ear l

ease

to c

onso

rtium

of p

rivat

e eq

uity

fund

s

Que

ensla

nd M

otor

way

s 3.

1 Tr

ansf

er to

sta

te p

ensio

n fu

nd

Que

ensla

nd R

ail

4.6

Publ

ic m

arke

t sal

e

Abb

ot P

oint

Coa

l Ter

min

al

1.8

99-y

ear l

ease

to in

dust

ry o

pera

tor

Fore

stry

Pla

ntat

ions

Que

ensla

nd

0.6

99-y

ear l

ease

to p

rivat

e eq

uity

fund


Mek

eta

Inve

stm

ent G

roup

Pote

ntia

l Opp

ortu

nitie

s

Ont

ario

/Gre

enEn

ergy

Inve

stm

entA

gree

men

t(“G

EIA”

)

In20

10,t

heG

over

nmen

tofO

ntar

io,C

anad

asig

ned

the

GEI

Aw

ithSa

msu

ngC

&T

and

Kore

aEl

ectri

cPo

wer

Com

pany

,pro

vidi

ngin

cent

ives

tobu

ildfa

cilit

ies

that

man

ufac

ture

rene

wab

leen

ergy

com

pone

nts.

Ifm

anuf

actu

ring

goal

sar

em

et,

Sam

sung

C&

Tw

illre

ceiv

eas

sista

nce

from

certa

inpr

ovin

cial

agen

cies

insit

ing,

perm

ittin

g,an

din

terc

onne

ctin

gth

epr

ojec

ts,

and

20-y

ear

pow

erpu

rcha

seag

reem

ents

with

the

Ont

ario

Pow

erA

utho

rity

onte

rms

simila

rto

the

prov

inci

alFe

ed-In

-Tar

iff(“

FIT”

)Pro

gram

.

Opp

ortu

nity

:Th

epr

ovin

cial

gove

rnm

ent

stre

amlin

edth

eap

prov

als

proc

ess

tosu

ppor

tre

new

able

sde

velo

pmen

t,w

hich

ince

ntiv

ized

priv

ate

inve

stm

ent

inge

nera

tion

and

trans

miss

ion

infra

stru

ctur

e.

Con

side

ratio

ns:

The

agre

emen

tha

sco

me

unde

rfir

eby

cert

ain

polit

ical

parti

es,

argu

ing

that

nosin

gle

corp

orat

ion

shou

ldbe

gran

ted

spec

ialt

erm

s,an

dth

atth

eco

stsa

ssoc

iate

dw

ithth

eag

reem

enta

reno

tdef

ensib

le.

31


Con

clus

ion


Mek

eta

Inve

stm

ent G

roup

Con

clus

ion

Insu

mm

ary,

this

docu

men

tid

entif

ies

seve

ral

cond

ition

sth

atha

veim

pact

edin

stitu

tiona

lin

vest

men

tin

Cal

iforn

iaIn

frast

ruct

ure:

•M

any

infra

stru

ctur

eas

sets

are

still

inpu

blic

owne

rshi

pan

dop

erat

ion,

and

thus

have

not

been

read

ied

orst

ruct

ured

toac

com

mod

ate

priv

ate

inve

stm

ent.

Inad

ditio

n,th

eus

eof

publ

icse

ctor

finan

cing

sour

ces

has

limite

dth

ero

leof

third

-par

tyin

vest

men

tand

priv

ate

parti

cipa

tion.

•Pr

otra

cted

bidd

ing

and

proc

urem

ent

proc

esse

sha

vere

duce

dth

epr

edic

tabi

lity

and

certa

inty

oftra

nsac

ting.

•Le

gisla

tive

initi

ativ

esha

veen

able

dPP

Ppr

ojec

tsto

finan

cene

win

frast

ruct

ure

deve

lopm

ent

and

cons

truct

ion.

Whi

lesu

chpr

ojec

tsar

eof

impo

rtan

ceto

the

stat

e,th

eym

ayno

tm

eet

the

risk/

retu

rncr

iteria

,or

the

inve

stm

ent

polic

yre

quire

men

tsof

publ

icpe

nsio

nfu

nds,

such

asC

alPE

RS.

•Pr

ivat

ein

frast

ruct

ure

sect

ors,

incl

udin

gce

rtain

utili

tyan

den

ergy

proj

ects

,ha

vebe

enm

ore

suita

ble

for

inst

itutio

nali

nves

tmen

t.Tr

ansa

ctio

nsin

priv

ate

infra

stru

ctur

ese

ctor

sha

vety

pica

llyfo

llow

eda

com

mer

cial

proc

ess,

and

invo

lve

the

sale

ofco

mpa

nies

with

esta

blish

edop

erat

ing

hist

orie

s.H

owev

er,t

hepr

oces

sfo

rob

tain

ing

envi

ronm

enta

land

deve

lopm

enta

ppro

vals

hasi

mpa

cted

the

pred

icta

bilit

yan

dce

rtain

tyof

trans

actin

g.

33


Mek

eta

Inve

stm

ent G

roup

Con

clus

ion

Des

pite

thes

ech

alle

nges

,the

rear

ear

easo

fpot

entia

lopp

ortu

nity

wor

thy

ofco

nsid

erat

ion:

•W

orki

ngw

ithap

prop

riate

,ex

pert

advi

sors

,pub

licag

enci

esm

aybe

able

toas

sess

and

deve

lop

inve

stib

leop

portu

nitie

sar

ound

exist

ing

oper

atio

nal

asse

tscu

rren

tlyun

der

publ

icow

ners

hip,

and

equi

pth

emse

lves

for

fruitf

uldi

scus

sions

arou

ndsu

chop

portu

nitie

sw

ithin

stitu

tiona

linv

esto

rssu

chas

Cal

PERS

.

•Th

egr

eate

rle

gal

auth

ority

gran

ted

tom

unic

ipal

ities

inC

alifo

rnia

unde

rBr

oad

Hom

eRu

lest

atus

may

allo

wfo

rlo

cala

ndre

gion

alau

thor

ities

tone

gotia

tean

dw

ork

dire

ctly

with

pote

ntia

linv

esto

rssu

chas

Cal

PERS

.

•St

ate

agen

cyst

atus

may

prov

ide

publ

icpe

nsio

nfu

nds

such

asC

alPE

RSw

ithan

adva

ntag

efo

rpa

rtner

ing

with

the

publ

icse

ctor

,by

prov

idin

gth

eab

ility

topa

rtner

with

outg

ener

atin

gan

adve

rse

impa

cton

exist

ing

publ

icfin

anci

ngso

urce

s.

34


Cas

e St

udie

s


Mek

eta

Inve

stm

ent G

roup

Cas

e St

udie

s

Cas

eSt

udy:

Was

tew

ater

PPP

36

Proj

ect

Sant

a Pa

ula

Was

tew

ater

Tre

atm

ent F

acili

ty

Back

grou

nd

Sant

a Pa

ula’

s or

igin

al w

aste

wat

er fa

cilit

y w

as b

uilt

in 1

939

and

need

ed to

be

repl

aced

in o

rder

to

com

ply

with

cur

rent

sta

te r

equi

rem

ents

. T

he c

ity f

aced

mor

e th

an $

8 m

illio

n do

llars

in

com

plia

nce-

rela

ted

fines

fro

m t

he S

tate

. T

he W

ater

Qua

lity

Con

trol B

oard

agr

eed

that

if

the

city

co

uld

com

e in

to

com

plia

nce

by

Dec

embe

r 15

, 20

10,

the

Boar

d w

ould

w

aive

th

e ac

cum

ulat

ed fi

nes.

Stru

ctur

e A

Des

ign-

Build

-Ope

rate

-Fin

ance

con

cess

ion

betw

een

a pu

blic

age

ncy

and

priv

ate

inve

stor

s.

The

proj

ect

was

con

tract

ed u

nder

Cal

iforn

ia G

over

nmen

t C

ode

5956

, w

hich

aut

horiz

es l

ocal

go

vern

men

tal

agen

cies

to

use

desig

n-bu

ild t

o co

nstru

ct f

ee p

rodu

cing

inf

rast

ruct

ure

faci

litie

s,

parti

cula

rly w

ater

sup

ply,

trea

tmen

t, an

d di

strib

utio

n.

In M

ay 2

008,

the

City

Cou

ncil

awar

ded

a 30

yea

r de

sign-

build

-ope

rate

-fina

nce

(DBO

F)

conc

essio

n to

San

ta P

aula

Wat

er, L

LC, a

join

t ve

ntur

e en

tity

owne

d by

Alin

da C

apita

l Par

tner

s LL

C a

nd P

ERC

Wat

er.

Und

er th

e co

nces

sion,

San

ta P

aula

Wat

er L

LC is

pai

d a

serv

ice

fee

that

is

expe

cted

to in

crea

se b

y 3%

eac

h ye

ar fo

r 30

year

s.

Opp

ortu

nitie

s Pr

ovid

ed a

priv

ate

capi

tal s

olut

ion

to a

mun

icip

ality

in n

on-c

ompl

ianc

e of

env

ironm

enta

l law

s.

Giv

en C

alifo

rnia

's g

row

ing

popu

latio

n an

d pe

renn

ial s

horta

ge o

f w

ater

, re

cycl

ing

is so

met

hing

m

uch

of th

e st

ate

will

nee

d to

con

sider

to m

eet w

ater

nee

ds.

Cha

lleng

es

The

DBO

F st

ruct

ure

requ

ires

inve

stor

s to

ass

ume

deve

lopm

ent

and

cons

truc

tion

risk

, and

w

ill n

ot p

rodu

ce c

ash

yiel

d un

til th

e pr

ojec

t is

oper

atio

nal.


Mek

eta

Inve

stm

ent G

roup

Cas

e St

udie

s

Cas

eSt

udy:

Avai

labi

lity

Road

37

Proj

ect

Pres

idio

Par

kway

Back

grou

nd

The

proj

ect

cons

ists

of t

he e

xist

ing

sout

h ac

cess

roa

d to

the

Gol

den

Gat

e Br

idge

, kn

own

as

Doy

le D

rive

or R

oute

101

. O

rigin

ally

bui

lt in

193

6, D

oyle

Driv

e w

as d

eem

ed s

truct

ural

ly a

nd

seism

ical

ly d

efic

ient

acc

ordi

ng to

pre

sent

sta

ndar

ds.

Stru

ctur

e Th

e Sa

n Fr

anci

sco

Cou

nty

Tran

sit A

utho

rity

ente

red

into

a 3

3 ye

ar D

esig

n Bu

ild F

inan

ce

Ope

rate

and

Mai

ntai

n co

nces

sion

with

Gol

den

Link

Con

cess

iona

ire,

LLC

, a

cons

ortiu

m le

d by

H

ocht

ief

PPP

Solu

tions

Nor

th A

mer

ica

and

Mer

idia

m I

nfra

stru

ctur

e N

orth

Am

eric

a.

Use

rs

wou

ld n

ot b

e as

sess

ed t

olls,

and

ava

ilabi

lity

paym

ents

wou

ld b

e m

ade

prim

arily

fro

m t

he

Stat

e H

ighw

ay A

ccou

nt.

Opp

ortu

nitie

s Pr

esid

io P

arkw

ay i

s th

e fir

st P

PP p

roje

ct t

o be

dev

elop

ed u

nder

SB

2X 4

. T

he t

rans

actio

n ut

ilize

s a

larg

e co

mpo

nent

of T

IFIA

fund

ing.

Und

er th

e av

aila

bilit

y pa

ymen

t stru

ctur

e, in

vest

ors

do n

ot a

ssum

e tra

ffic

risk.

Cha

lleng

es

As w

ith o

ther

PPP

s, P

resi

dio

Park

way

has

a 3

yea

r co

nstr

ucti

on p

erio

d, d

urin

g w

hich

the

pr

ojec

t w

ill n

ot b

e di

stri

butin

g yi

eld

to i

nves

tors

, an

d re

quir

es t

hat

inve

stor

s as

sum

e de

velo

pmen

t an

d co

nstr

uctio

n ri

sk.

And,

whi

le i

nves

tors

do

not

assu

me

traf

fic r

isk

unde

r th

e av

aila

bilit

y pa

ymen

t str

uctu

re, t

hey

neve

rthe

less

ass

ume

the

risk

that

the

publ

ic a

genc

y w

ill a

ppro

pria

te fu

nds

agre

ed u

pon

in th

e co

nces

sion

agr

eem

ent.


Mek

eta

Inve

stm

ent G

roup

Cas

e St

udie

s

Cas

eSt

udy:

Rene

wab

leEn

ergy

Gen

erat

ion

38

Proj

ect

Terr

a-G

en /

Alta

Win

d

Back

grou

nd

Terr

a-G

en is

a r

enew

able

ene

rgy

com

pany

with

app

roxi

mat

ely

830

meg

awat

ts (

“MW

”) o

f op

erat

ing

pow

er

plan

ts

acro

ss

geot

herm

al,

win

d,

and

sola

r te

chno

logi

es,

as

wel

l as

a

deve

lopm

ent

pipe

line

of

over

15

,000

MW

.

To

date

, al

l op

erat

ions

ha

ve

been

pr

imar

ily

focu

sed

on

Cal

iforn

ia.

In

2009

, G

loba

l In

frast

ruct

ure

Partn

ers

(“G

IP”)

acq

uire

d a

40%

of T

erra

-Gen

for a

ppro

xim

atel

y $5

56m

m.

Terr

a-G

en

acqu

ired

the

Alta

pr

ojec

t fro

m

Allc

o Fi

nanc

e G

roup

fo

r $3

25

mill

ion

plus

$6

5 m

illio

n of

w

ind

turb

ine

prog

ress

pa

ymen

ts.

Th

e pr

ojec

t is

loca

ted

appr

oxim

atel

y

100

mile

s fro

m L

os A

ngel

es i

n th

e Te

hach

api

regi

on o

f C

alifo

rnia

, w

here

a s

igni

fican

t po

rtio

n of

the

C

ompa

ny’s

exi

stin

g w

ind

asse

ts a

re in

ope

ratio

n.

The

Alta

Win

d En

ergy

Cen

ter

is ex

pect

ed t

o pr

ovid

e up

to

3,00

0 M

W o

f re

new

able

gen

erat

ing

capa

city

. W

hen

com

plet

ed, A

lta is

exp

ecte

d to

be

the

larg

est w

ind

pow

er p

roje

ct in

the

Uni

ted

Stat

es.

Stru

ctur

e Te

rra-

Gen

has

a P

ower

Pur

chas

e A

gree

men

t (“

PPA

”) w

ith S

outh

ern

Cal

iforn

ia E

diso

n (“

SCE”

) un

der

whi

ch

1,55

0 M

W o

f fut

ure

deve

lopm

ent i

s co

ntra

cted

, with

con

tract

pric

es a

djus

ting

for

chan

ges

in tu

rbin

e ca

pita

l co

sts,

inte

rest

rate

s an

d C

alifo

rnia

’s in

cent

ive

pric

ing

regi

me

for r

enew

able

pow

er.

Impo

rtant

ly,

Terr

a-G

en h

as o

ver

2,90

0 M

W o

f re

serv

atio

ns f

or c

omm

itted

tra

nsm

issio

n ca

paci

ty o

n ne

w

trans

miss

ion

faci

litie

s th

at a

re c

urre

ntly

bei

ng b

uilt

by S

CE.

Opp

ortu

nitie

s Th

e bu

lk o

f Te

rra-

Gen

’s c

apac

ity i

s lo

cate

d in

Cal

iforn

ia,

a m

arke

t w

ith h

igh

pow

er p

rices

, de

man

ding

Re

new

able

Por

tfolio

Sta

ndar

d (“

RPS”

) re

quire

men

ts (

33%

of

tota

l el

ectri

city

pro

duct

ion

by 2

020)

and

a

gene

rally

diff

icul

t de

velo

pmen

t an

d pe

rmitt

ing

envi

ronm

ent,

whi

ch e

nhan

ces

the

scar

city

and

val

ue o

f a

rene

wab

le e

nerg

y pl

atfo

rm.

Cha

lleng

es

For

Cal

iforn

ia u

tiliti

es t

o m

eet

the

stat

e’s

man

date

d 33

% R

PS b

y 20

20,

mul

tiple

lar

ge s

cale

fac

ilitie

s su

ch a

s Al

ta W

ind

will

nee

d to

be

deve

lope

d.

Cur

rent

env

iron

men

tal,

deve

lopm

ent,

and

perm

ittin

g ch

alle

nges

, how

ever

, hav

e re

sulte

d in

the

dela

y or

term

inat

ion

of m

any

such

pro

ject

s.


Mek

eta

Inve

stm

ent G

roup

Cas

e St

udie

s

Cas

eSt

udy:

Nat

ural

Gas

Pipe

line

39

Proj

ect

Ruby

Pip

elin

e

Back

grou

nd

Ruby

is

an a

ppro

xim

atel

y 67

5-m

ile F

ERC

Reg

ulat

ed n

atur

al g

as p

ipel

ine

to b

e co

nstr

ucte

d,

owne

d an

d op

erat

ed i

n a

join

t ve

ntur

e be

twee

n G

loba

l Inf

rast

ruct

ure

Part

ners

(“G

IP”)

and

El

Paso

Cor

pora

tion.

W

hen

com

plet

ed,

Ruby

will

tra

nspo

rt na

tura

l gas

fro

m t

he g

row

ing

Rock

y M

ount

ain

supp

ly re

gion

to th

e U

.S. W

est C

oast

mar

kets

.

Stru

ctur

e G

IP h

as c

omm

itted

to

inve

st u

p to

$70

0 m

illio

n in

thi

s jo

int

vent

ure

with

El P

aso,

whi

ch is

the

la

rges

t ow

ner

and

oper

ator

of

inte

rsta

te n

atur

al g

as p

ipel

ines

in

the

U.S

. O

nce

Ruby

is

oper

atio

nal,

GIP

and

El P

aso

will

ow

n an

d op

erat

e th

e pi

pelin

e on

a 5

0/50

bas

is.

Cur

rent

ly,

73%

of c

apac

ity is

con

trac

ted

(10-

15 y

rs).

Opp

ortu

nitie

s Th

e m

acro

env

ironm

ent

is fa

vora

ble,

bec

ause

pro

duct

ion

in W

este

rn C

anad

a, w

hich

is

the

bigg

est

supp

lier

to t

he W

este

rn U

S, i

s do

wn,

whi

le C

anad

ian

dem

and

is up

- c

ondi

tions

tha

t sh

ould

sup

port

addi

tiona

l su

pply

fro

m t

he R

ocki

es,

and

thro

ugh

Ruby

. T

here

is

also

an

incr

easin

g sh

ift f

rom

coa

l to

gas

in C

alifo

rnia

and

Can

ada,

whi

ch s

houl

d cr

eate

mor

e de

man

d fo

r gas

pro

duct

ion

and

gas

pipe

lines

.

Cha

lleng

es

Cal

iforn

ia is

the

pri

mar

y m

arke

t w

hich

Rub

y pi

pelin

e w

ill s

erve

. H

owev

er, t

he d

evel

oper

s de

cide

d to

not

to

build

the

pip

elin

e in

Cal

iforn

ia,

due

to c

once

rns

that

dev

elop

men

t ch

alle

nges

and

env

iron

men

tal a

ppro

vals

wou

ld p

rolo

ng th

e de

velo

pmen

t pro

cess

.


Refe

renc

es


Mek

eta

Inve

stm

ent G

roup

Refe

renc

es

Alte

rnat

ive

Proj

ectD

eliv

ery

Met

hods

forP

ublic

Wor

ksPr

ojec

tsin

Cal

iforn

ia,D

avid

S.G

ehrig

,Han

son

Brid

gett

LLP,

2009

Annu

alPr

ivat

izat

ion

Repo

rt20

10:A

irTr

ansp

orta

tion,

Reas

onFo

unda

tion,

2010

Build

ing

Cal

iforn

ia:I

nfra

stru

ctur

eC

hoic

esan

dSt

rate

gy,L

ittle

Hoo

verC

omm

issio

n,20

10

Cal

iforn

ia’s

Five

Year

Infra

stru

ctur

ePl

an20

03,C

alifo

rnia

Dep

artm

ento

fFin

ance

,200

3

Cal

iforn

ia’s

Incr

easin

gD

ebtB

urde

nTh

reat

ens

Stat

e’sA

bilit

yto

Fund

Vita

lInf

rast

ruct

ure

Proj

ects

,Ker

sten

Com

mun

icat

ions

,200

9

CEQ

ABa

selin

eC

onfu

sion

Thre

aten

sPr

ojec

tsTh

roug

hout

Cal

iforn

ia,N

ossa

man

n,20

11

Driv

ing

Inve

stor

Inte

rest

inFe

dera

llyFu

nded

Proj

ects

,KPM

G,2

011

Dat

abas

eof

Inve

stor

-Ow

ned

Util

ities

'Con

tract

sfo

rRen

ewab

leG

ener

atio

n,C

alifo

rnia

Dep

artm

ento

fEne

rgy,

2011

Fram

ewor

kC

ondi

tions

forF

orei

gnan

dD

omes

ticPr

ivat

eIn

vest

men

tin

Cal

iforn

ia’s

Infra

stru

ctur

e,Ba

yAr

eaC

ounc

ilEc

onom

icIn

stitu

te,2

010

Fund

ing

Inno

vatio

nsfo

rCal

iforn

iaIn

frast

ruct

ure:

Prom

ises

and

Pitfa

lls,K

esto

nIn

stitu

te,2

006

Just

the

Fact

s,Pu

blic

Polic

yIn

stitu

teof

Cal

iforn

ia,2

011

New

Inte

rest

inU

.S.A

irpor

tPriv

atiz

atio

n,Ja

cobs

Con

sulta

ncy,

2007

AnO

verv

iew

ofLo

calG

over

nmen

tGen

eral

Obl

igat

ion

Bond

Issu

ance

Tren

ds,C

alifo

rnia

Deb

t&In

vest

men

tAdv

isory

Com

miss

ion,

2008

Payi

ngfo

rInf

rast

ruct

ure:

Cal

iforn

ia’s

Cho

ices

,Pub

licPo

licy

Inst

itute

ofC

alifo

rnia

,200

9

Prop

osed

Wor

kPl

anfo

r201

1,Pu

blic

Infra

stru

ctur

eAd

viso

ryC

omm

issio

n,20

11

PPPs

and

Mun

icip

alH

ome

Rule

,Alle

n&

Ove

ry20

09

The

Stat

eof

Cal

iforn

iaD

ebtA

fford

abili

tyRe

port,

Stat

eTr

easu

rer’s

Offi

ce,2

009

Wha

tIsR

eally

Cau

sing

Rene

wab

lePr

ojec

tFai

lure

sin

Cal

iforn

ia?,

Man

att,

Phel

ps&

Phill

ips,

2011

41


http://www.hansonbridgett.com/docs/articles/AltProjectDeliveryMethods_DSGehrig.pdf



















http://reason.org/files/aviation_annual_privatization_report_2010.pdf












http://www.lhc.ca.gov/studies/199/report199.pdf












http://www.dof.ca.gov/capital_outlay/reports/documents/CA_5yr_plan03web.pdf











http://www.kerstencommunications.com/wp-content/uploads/2009/12/KCFiscalFocusDec2009.pdf























http://www.nossaman.com/7830













C:/Users/mholfield/AppData/Local/Microsoft/Windows/Temporary Internet Files/Content.Outlook/P3M4390M/nasto.org/wp-content/uploads/.../Wilschetz-NASTO-Presentation-6-6-11.ppt













http://www.energy.ca.gov/portfolio/contracts_database.html

















http://www.bayeconfor.org/media/files/pdf/SeizingtheP3opportunity.pdf





















http://www.urban.org/uploadedPDF/1000943_california_infrastructure.pdf
















http://www.ppic.org/content/pubs/jtf/JTF_PopulationJTF.pdf





http://www.leighfisher.com/pdfs/.../Focus-Airport-Privatization.pdf














http://www.treasurer.ca.gov/cdiac/publications/trends.pdf



















http://www.ppic.org/content/pubs/atissue/AI_109EHAI.pdf










http://www.bth.ca.gov/pdf/PIAC_Proposed_Workplan_2011.pdf










C:/Users/mholfield/AppData/Local/Microsoft/Windows/Temporary Internet Files/Content.Outlook/P3M4390M/clientlink.allenovery.com/images/0912-homeRule_SP09.pdf









http://www.treasurer.ca.gov/publications/2009dar.pdf













http://www.environmentalleader.com/2011/.../what-is-really-causing-renewable-project-failures-in-california/


















Agenda

9:30 – 9:45 a.m. Welcome, Agenda, Introductions Anne Stausboll, CalPERS Priya Mathur, CalPERS Laurie Weir, CalPERS Richard Little, Price School of Public Policy, University of Southern California

9:45 – 9:55 a.m. CalPERS Infrastructure Investment Randall Mullan, CalPERS Todd Lapenna, CalPERS

10:00 – 10:45 a.m. CalPERS Infrastructure Transaction Examples Richard Little Randall Mullan Todd Lapenna

10:15 – 10:35 a.m. Transportation Needs and Funding – The State Perspective Richard Little Kome Ajise, Caltrans Steve Coony, State Treasurer’s Office Erica Martinez, Office of Assembly Speaker John A. Perez

10:35 – 10:50 a.m. Potential Investment Structures for CalPERS Richard Little John Pirog, Hawkins Delafield & Wood LLP

10:50 – 11:00 a.m. Break

11:00 – 11:45 a.m. Investment Challenges and Solutions Richard Little Geoff Yarema, Nossaman LLP Paul Ryan, J.P. Morgan Securities, LLC Jose Luis Moscovich, San Francisco County Transportation Authority

11:45 a.m. – 12:30 p.m. Lunch

CalPERS Infrastructure Investment Roundtable: Transportation

Thursday, April 5, 20129:30 a.m. to 2:45 p.m.

The Fairmont San Francisco950 Mason StreetSan Francisco, California


12:30 – 1:45 p.m. Regional Agencies’ Projects and Approaches to Financing Richard Little Kenneth Phipps, Orange County Transportation Authority Mike Schneider, Infraconsult, LLC for Los Angeles Metropolitan Transportation Authority Marney Cox, San Diego Association of Governments Brian Mayhew, Metropolitan Transportation Commission/Bay Area Toll Authority Andrew Fremier, Metropolitan Transportation Commission/Bay Area Toll Authority

1:45 – 2:00 p.m. Break

2:00 -2:30 p.m. Potential Roles for CalPERS Richard Little

2:30 -2:45 p.m. Wrap-up and Thank You Richard Little Laurie Weir


Agenda

10:30 - 10:45 a.m. Welcome, Agenda, Introductions Joe Dear, CalPERS Henry Jones, CalPERS Laurie Weir, CalPERS Tony Oliveira, Professor Economics/Public Policy

10:45 - 11:05 a.m. Water Needs and Funding – The State Perspective Tony Oliveira Steve Coony, State Treasurer’s Office Perla Netto-Brown, California Department of Water Resources Richard Sanchez, California Department of Water Resources John Rossi, Association of California Water Agencies and California Special Districts Association

11:05 a.m. - 12:15 p.m. Regional Agencies’ Projects and Approaches to Financing Tony Oliveira Gary Breaux, Metropolitan Water District of Southern California Philip Leiber, Los Angeles Department of Water and Power Eric Sandler, East Bay Municipal Utility District David Orth, Kings River Conservation District

12:15 - 1:00 p.m. Lunch

1:00 - 1:35 p.m. Investment Challenges and Solutions Tony Oliveira Doug Montague, Montague deRose Allan Marks, Milbank

1:35 p.m. - 1:45 p.m CalPERS Infrastructure Investment Program Tony Oliveira Randall Mullan, CalPERS Todd Lapenna, CalPERS

1:45 - 2:05 p.m. Potential Roles for CalPERS

Tony Oliveira Laurie Weir

2:05 - 2:25 p.m. Wrap-up and Thank you Tony Oliveira Laurie Weir

CalPERS Infrastructure Investment Roundtable: Water

Monday, April 23, 201210:30 a.m.

Crowne Plaza Hotel5985 W. Century BlvdLos Angeles, CA 90045


Agenda

10:30 – 10:45 a.m. Welcome, Agenda, Introductions Anne Stausboll, CalPERS George Diehr, CalPERS John Chiang, State Controller Laurie Weir, CalPERS Tony Oliveira, Professor Economics/Public Policy

10:45 – 11:05 a.m. CalPERS Investment Overview: Infrastructure Investment Program Tony Oliveira Randall Mullan, CalPERS Todd Lapenna, CalPERS Sarah Corr, CalPERS

11:05 a.m. – 12:05 p.m. Energy Projects: Investment Challenges and Successes in California Tony Oliveira Ed Feo, Seaward Road Capital Mike O’Sullivan, NextEra Energy Inc. Alex Makler, Calpine

12:05 – 12:50 p.m. Lunch

12:50 – 1:10 p.m. Energy Projects: Investment Challenges and Successes in California (continued) Tony Oliveira Steve Doyon, Terra-Gen Ed Stern, PowerBridge LLC

1:10 – 2:10 p.m. Energy Needs and Funding: The State and Utilities Perspective Tony Oliveira Robert Weisenmiller, California Energy Commission Patrick Lee, San Diego Gas & Electric Stuart Hemphill, Southern California Edison

2:10 – 2:25 p.m. Potential Roles for CalPERS Tony Oliveira Laurie Weir, CalPERS

2:25 - 2:45 p.m. Wrap-up and Thank You

CalPERS Infrastructure Investment Roundtable: Energy

Thursday, May 24, 201210:00 a.m. to 2:45 p.m.

Sheraton San Diego Hotel and Marina1590 Harbor Island DriveSan Diego, California


Infrastructure Roundtable Attendees Name Affiliation

Aijise, Kome California Department of Transportation Ailman, Chris CalSTRS

Altshuler, David Meketa Investment Group Ardhaldjian, Raffy City of Los Angeles

Beatty, Greg DPA Beeson, Dave Orange County Employee Retirement System

Bernstein, Sarah Pension Consulting Alliance, INC. Bettencourt, Rocel Senate Republican Caucus Billimoria, Farhad CalPERS Investment Office Blackledge, Scot CalPERS, GOVA

Bloom, Ron Lazard Freres & Co., LLC Bonner, Dale Cal-INFRA Advisors, Inc. Bourgart, Jim Parsons Brinckerhoff Boykin, Grant State Treasurer's Office Breaux, Gary Metropolitan Water District of Southern CA

Brown, Danny CalPERS Division Chief Burcar, Lisa Marie Professional Engineers in California Government Burford, Mary Ann CalPERS Executive Office

Burnett, Alex JP Morgan Carlson, Mike JP Morgan

Carol, Dan State of Oregon - Office of Governor John Kitzhaber Casarez, Ken LiUNA

Chambers, Judy Pension Consulting Alliance, INC. Chiang, John California State Controller Coony, Steve Office of State Treasurer Corr, Sarah CalPERS Investment Office

Costigan, Richard CalPERS Board of Administration Cox, Marney San Diego Association of Government

Crandall, Steve CalPERS, ITBS Cullison, Randy Tenaska Capital

Cunningham, Michelle CalSTRS Dear, Joe CalPERS Chief Investment Officer

Diehr, George CalPERS Board of Administration Doyon, Steve Terra-Gen Power LLC Dunn, Lucy Orange County Business Council

Eliopoulos, Ted CalPERS Investment Office Ellis, Chris CalSTRS


Enderton, Laura CalPERS, Office of Stakeholder Relations Evans, Linda CalPERS Strategic Event MGMT

Feo, Ed Seaward Road Capital Fickett, Kent Ramco Generating Flocks, Sara California Labor Federation Fox, William N/A

Freeman, David Water and Energy Expert Fremier, Andrew MTC Friedman, Steven Huntington Capital

Galli, Barbara CalPERS Strategic Event MGMT Garvey, Jane Meridiam Infrastructure Gilloti, Rachel Clean Energy Fund (in place of Paul Frankel)

Glazier, Robert CalPERS Deputy Executive Officer, External Affairs Guillot, Janine CalPERS Investment Office

Hemphill, Stuart Southern California Edison Company Hendricks, Bracken Center for American Progress

Houlberg, John JP Morgan Hutson, Erin LiUNA

Jacobson, Kern Infra Consult LLC Jacobson, Rob Irvine Ranch Water District

Jelincic, JJ CalPERS Board of Administration Jenkins, Bryant Sperry Capital

Jones, Henry CalPERS Board of Administration Keiley, Harry CalSTRS Kelly, Liam KPMG

Kemmerer, John Environmental Protection Agency Kennedy, John Orange County Water District

Kennedy, Susan Health Benefits Exchange Kimport, David Nossaman Law Firm

Kulis, Mike San Diego Airports Lapenna, Todd CalPERS Investment Office

Larouche, Elisse Montague DeRose and Associates, LLC Lieber, Phil Los Angeles Department of Water and Power Link, Gary Senate Republican Caucus

Little, Richard AICP - Sol Price School of Public Policy, USC Liu, Peter Clean Energy Advantage Partners / CA Clean Energy Fund

Llyod, Barbara KPMG Lockyer, Bill State Treasurer

Luchetti, Peter Table Rock Capital


Makler, Alex Calpine Marks, Allan Milbank

Martin, Andrew UBS Global Asset Management Martinez, Erica Officer of Assembly Speaker Perez Martling, Jim Sperry Capital Mathur, Priya CalPERS Board of Administration

Matson, Megan Table Rock Capital Mayhew, Brian Bay Area Transportation Authority

McAllister, Andrew California Energy Commission McCourt, Stephen Meketa Investment Group

McGuire, Terry CalPERS Board of Administration Milliron, Pam State Treasurer's Office

Moly, Rohimah State Treasurer's Office Montague, Douglas Montague DeRose and Associates, LLC Moscovich, Jose Luis San Francisco County Transportation Agency

Mullan, Randall CalPERS Investment Office Mullen, Mike Centerpoint

Murphy, Dennak SEIU Capital Stewardship Program Lead Murray, John W. Jr. Metropolitan Water District of Southern CA Netto-Brown, Perla Department of Water Resources

Oliveira, Tony Professor of Economics, Public Policy Ordonez, Ernie LiUNA Oros, Mickey Altergy Systems

Orr, Ryan Stanford University Orth, David Kings River Conservation District

O'Sullivan, Mike Nextera Energy, Inc. Pacheco, Brad CalPERS Office of Public Affairs

Palfreyman, Justin Lazard Freres & Co., LLC Park, Eileen CalPERS Investment Office

Partridge, William SunTech Phipps, Ken OCTA Picker, Mike Office of Governor Jerry Brown Pirog, John Hawkins Delafield & Wood LLP

Poree, Jenny Montague DeRose and Associates, LLC Randall, Charles IBEW Randolph, Sean Bay Area Council

Reed, Jeffrey SoCalGas Rossi, John Western Municipal Water District Ryan, Paul JP Morgan


Saer, John GI Partners - Centerpoint Industrial/Infrastructure Sanchez, Richard Department of Water Resources

Sandler, Eric East Bay Municipal Utility District Sawers, Alistair Parsons Brinckerhoff Schaefer, Matt Nextera Energy, Inc.

Schneider, Michael Infra Consult LLC Schwartz, Howard CalPERS Board of Administration

Scow, Adam Food and Water Watch Seneviratne, Diloshini CalSTRS

Shanahan, Alan AFSCME Shea, Steve Office of Senate President Pro Tem Darrell Steinberg

Silvers, Damon ALF-CIO Smith, Shelley Ilene Grayshell Consulting

Stausboll, Ann CalPERS Chief Executive Officer Stern, Ed Powerbridge LLC

Tamminen, Terry Seventh Generation Advisors Tilmont, David IBEW

Tomasyan, Glenn SunTech Trevino, Theresia Riverside County Transportation Commission

Velez, Izakk LiUNA Weir, Laurie CalPERS Investment Office

Williams, Felicia Edison Mission Energy Williams, Karen Carroll Community Investments, LLC

Woo, Susan BATA Yarema, Geoff Nossaman Law Firm


October 2012 2012.10.1

California Public Employees’ Retirement System400 Q StreetP.O. Box 942701Sacramento, CA 94229-2701(916) 795-3991(916) 795-3507 faxTTY: (916) 795-3240www.calpers.ca.gov


Date post:	27-Mar-2018
Category:	Documents
Upload:	dangcong
View:	215 times
Download:	2 times

Infrastructure Outreach Final Report -...

Documents